EIC CLMV Outlook Q3/2021

Starting from 2Q21, regional COVID-19 resurgences have been significantly weighing on CLMV growth prospects, despite still-robust exports providing some cushions for the impacts.

• On the domestic front, widespread outbreaks across all CLMV countries since April 2021 have caused CLMV governments to further tighten contain measures. As a result, economic activities were hampered, and already-fragile domestic demands were suppressed. Containing the most recent COVID-19 waves have been proven the be the toughest challenges for the region so far, even for Vietnam who successfully re-contained multiple outbreaks earlier. This time, however, Vietnam continues to face severe infection rates and has been imposing strictest lockdown measures. At the same time, Myanmar is also facing high number of cases amid medical personnel shortages due to political turmoil. Numbers of COVID-19 cases in Cambodia and Laos are also higher than previous outbreaks, but lower than the other two countries.
  
  
• On the external front, however, CLMV exports remained resilience amid the pandemic, owing to further recovery in demand among developed economies and provided supports for the region’s growth prospects. Vietnam’s electronics exports sector continued to display robust performance and be the region’s key driver. Nonetheless, the risk to regional supply chain disruption warrants monitoring, with widespread pandemic posing threats of further factory closures, and could be a significant headwind to the exports sector from 3Q21 onward.
  
  
• Going forward, CLMV economic recovery in 2021F will continue to hinge on: 1) The effectiveness and timeliness of COVID-19 containment measures as well as vaccination progress to allow resumption of economic activities, 2) The size and effectiveness of fiscal and monetary stimulus measures to mitigate impacts on households and businesses and 3) Country-specific factors including ongoing political uncertainty in Myanmar and debt-servicing ability in Laos.