SCB EIC expects CLMV outlook to face diverging risks amid global trade headwinds

• Growth deceleration expected: SCB EIC projects a slowdown in CLMV economies to 5.1% in 2025, down from 6.3% in 2024, mirroring the broader global economic and global trade deceleration. 
  
  
• Same region, diverging challenges: Elevated tariffs under Trump 2.0 are a significant concern, directly impacting export-driven CLMV economies. Vietnam and Cambodia are particularly exposed to these tariff risks. While CLMV economies face global trade uncertainty and cheap Chinese imports, country-specific challenges intensify individual pressures.
  
  
• Persistent downside risks remain: ranging from political instability and the aftermath of an earthquake in Myanmar, border tensions in Cambodia, to Lao PDR’s debt vulnerabilities—continue to weigh on consumption and dampen investor confidence.
  
  
• Vietnam growth relatively strong among CLMV bloc: Vietnam benefits from production shifts to ASEAN, strong supply chains, and reform-driven policies.
  
  
• Thailand’s regional trade and investment softens: Trade and investment flows between Thailand and CLMV are expected to moderate due to weaker regional demand, heightened global trade uncertainty, and cross-border political risks

Slower growth trajectory under synchronized risks and domestic pressures

SCB EIC anticipates CLMV economies to slow to 5.1% in 2025, down from 6.3% in 2024 as elevated U.S. tariffs under potential Trump 2.0 policies threaten export-driven growth models, particularly Vietnam and Cambodia, which are more reliance on external trade. The influx of cheap Chinese goods further undermines local production and competitiveness. Beyond trade, a global economic slowdown will indirectly impact CLMV growth prospects.

In 2025, SCB EIC projects slower growth across CLMV economies. Cambodia is expected to grow by 3.9% (down from 6.0% in 2024), Lao PDR by 3.6% (from 4.3%), and Vietnam by 6.3% (from 7.1%). In contrast, Myanmar’s economy is forecast to contract by -0.5% (from 2.3%).

The CLMV countries face external risks depending on their reliance on exports to the U.S. market, as well as country-specific challenges. For example, Vietnam and Cambodia are vulnerable to global trade risks due to their high dependence on exports to the U.S. Meanwhile, Myanmar, Cambodia, and Laos face domestic risks such as political instability and earthquakes in Myanmar, border tensions between Thailand and Cambodia, and fragile external stability in Laos, all of which add pressure to the region’s economic outlook. Additionally, some countries face macroeconomic and financial vulnerabilities—such as partial use of the U.S. dollar in their economies—which may expose them to the impacts of changes in U.S. interest rates.

Despite these risks, some supportive factors in the first half of the year may help partially cushion the economy—particularly front-loaded exports, a recovering tourism sector, and an improving labor market. In addition, the broader ASEAN economy is expected to provide some support for tourism and foreign investment inflows into the CLMV countries.

Country-specific factors

Vietnam is projected to be the standout performer. The country’s appeal as a manufacturing hub, driving by the ongoing relocation of production bases to ASEAN, more robust domestic supply chains—especially in electronics—, relatively lower U.S. tariff rates compared to CLM peers, and stronger investment incentives such as FTAs and proactive reform agenda.

Cambodia’s growth is expected to moderate due to high U.S. tariffs and reliance on the U.S. market, with added pressure from Chinese import influx. Border tensions with Thailand may further hurt business confidence, cause goods shortages and raise inflation. However, strong early-2025 exports and tourism offer some cushion. Fiscal stability remains sound, allowing room for further stimulus if needed.

Lao PDR remains vulnerable despite limited direct tariff exposures. The economy is constrained by persistent external debt and vulnerable financial sector burdened by non-performing loans , Additionally, even though inflation and the weakening kip have slightly improved, and external buffers have strengthened, structural vulnerabilities remain key issues continue to weigh on country’s outlook.

Myanmar’s economy is expected to contract as domestic political instability, ongoing conflict, and the recent earthquake continue to disrupt business activity and dampen consumption and investment.With constrained monetary policy, limited fiscal space, and elevated NPLs, the scope for recovery remain narrow.

Softening trade and investment flows between Thailand and CLMV

Trade between Thailand and CLMV is expected to slow, weighed down by weaker regional demand and global trade uncertainty. Border tensions, particularly between Cambodia and Thailand, add further downside risks. Thailand’s outward direct investment to CLMV has surpassed pre-COVID levels and continues to diversify across sectors such as finance, insurance, and manufacturing. However, rising political uncertainty and cautious investor sentiment may moderate future investment flows.

The Thailand–Cambodia conflict poses risks through multiple channels. Despite a ceasefire, prolonged border closures could pressure on bilateral trade. Moreover, investment and tourism sentiment could weaken amid heightened regional instability. Nonetheless, if more Cambodian labor gradually return to Cambodia, the impact on the Thai labor market is likely to be limited, as workers from other nations can still be sourced as substitutes.