EIC CLMV Outlook Q2/2021
Even though global economic recovery in 2021 provided a strong boost to CLMV exports, regional COVID-19 resurgence and political unrest in Myanmar continued to significantly weigh down CLMV growth prospects. On the external front, CLMV exports should continue to grow in line with global economic and trade recovery, especially among developed economies. Vietnam, driven by a robust electronics exports sector, is expected to continue outperforming the region. Meanwhile, on the domestic front, widespread COVID-19 resurgence across all CLMV countries in 2Q21 is expected to suppress mobility and domestic demand. Vietnam faced previous multiple outbreaks, but health authorities successfully re-contained all those outbreaks with limited impacts on the domestic economy. Nonetheless, the most recent COVID-19 resurgence during April-May is posing another challenge for Vietnam’s future economic recovery and remains to be watched. For Myanmar, the nation has faced a prolonged outbreak plaguing recovery prospects since September 2020. More recently, Cambodia and Laos are now also facing severe resurgences for the first time in 2Q21. These recent regional outbreaks have led to stricter lockdown measures which will be a crucial determinant of CLMV 2021 economic growth trajectories. Meanwhile, increased political unrest in Myanmar is projected to cause severe and prolonged disruption to economic activities, causing EIC to significantly downgrade our forecasts for the nation.
As the CLMV countries are unlikely to achieve herd immunity in 2021, 2021F economic recovery will continue to hinge on two factors: 1) The size and effectiveness of fiscal and monetary stimulus responses to shore up growth and limit scarring effects and 2) Country-specific risks, including political uprisings in Myanmar and debt distress in Laos.