Cambodia, Laos, Myanmar, and Vietnam will gain stronger growth momentum in 2023, with a 6.2% rate for the Vietnamese economy, the highest among the four, Siam Commercial Bank’s Economic Intelligence Center forecasts.
Among the CLMV countries, the Cambodian economy would grow 5.5% this year, while Laos and Myanmar would both see a 3% rate, the center said in its Wednesday report.
The different post-pandemic recovery paces depend on economic fundamentals and country-specific risks in the CLMV group, the Thai bank’s unit said, adding that domestic demand and tourism would be key drivers for their economic rebound this year.
Domestic demand would gain support from improvements in the labor market, as seen in Vietnam’s Q4/2022 employment soaring to its highest level since the pandemic outbreak. Meanwhile, the service sector would benefit from rising tourist arrivals this year, particularly Chinese visitors who made up about 30-35% of total foreign tourists in pre-pandemic 2019.
China has authorized outbound group tours traveling to Cambodia and Laos starting on February 6, 2023, and is expected to add more destinations to the list soon. In particular, Cambodia and Vietnam are poised to benefit the most from tourism rebound, considering the high contribution of tourism, both domestic and foreign, to GDP at 18.2% and 9.8%, respectively, according to the report.
The CLMV central banks will likely implement a tighter monetary policy in 2023, but policy normalization will be gradual after inflation cools, the center said.
“Based on our assessment, CLMV inflation will start to wind down in line with falling global commodity prices in 2023, albeit slowly, as prices should remain elevated.”
These central banks will raise the policy rate slightly to curb inflation and stabilize national currencies. The center anticipates a slower rate hike in this year’s second half because the U.S. Federal Reserve has signaled a slower rate increase, which would alleviate downward pressure on the CLMV currencies, and because overall economic recovery remained fragile.
Notably, Thailand’s direct investment into CLMV is expected to grow this year, albeit slowly, from a subdued reading in 2022, the report said.
In the medium term, the Siam Commercial Bank’s unit views the CLMV region as remaining an appealing investment destination for Thai and foreign investors, thanks to low wages, a growing domestic market, and free trade agreements with major trade partners.
"Given those strategic advantages, the CLMV countries could become an attractive manufacturing base for exports to large markets such as China and India," said the Economic Intelligence Center.
Global credit rating agency Moody’s forecast on Monday that Vietnam’s economy would expand between 6 and 6.5% this year, supported by continued domestic recovery after the pandemic and increases in government spending on infrastructure projects.
The National Assembly, the country’s legislative body, has set the 2023 growth target of 6.5%. The World Bank, in its latest Global Economic Prospects released earlier this January, expects Vietnam to be the fastest-expanding economy in ASEAN this year with 6.3%.