Although CLMV countries are in the same region and face the same external factors from the global trade war, each country may face different risks: Higher import tariffs under the Trump 2.0 policy are a key factor, directly impacting the export-dependent economies of CLMV countries, especially Vietnam and Cambodia. They also face uncertainties in global trade and competition from cheap Chinese products, as well as country-specific challenges that will increase economic pressure.
Key highlights
- CLMV economies are expected to slow down: SCB EIC estimates that CLMV economies will slow to 5.1% in 2025 from 6.3% in 2024, in line with the global economic slowdown and world trade
- Downside risks remain across countries: Political instability and the impact of the earthquake in Myanmar, border tensions in Cambodia, and Lao PDR’s foreign debt vulnerability are all factors that continue to pressure domestic consumption and undermine investor confidence.
- Vietnam has stronger growth than other CLMV countries: Vietnam will benefit from the relocation of manufacturing bases to ASEAN, strong supply chains and various reform policy initiatives.
- Thailand’s trade and investment in CLMV slows down: a result of weaker regional demand
Rising global trade uncertainty and heightened international political risks
SCB EIC projects CLMV economic growth to slow to 5.1% in 2025, down from 6.3% in 2024, due to higher US tariffs under the Trump 2.0 policy, which is impacting export-driven growth models, particularly in Vietnam and Cambodia, which rely heavily on international trade. Furthermore, the influx of cheap goods from China is eroding domestic production and competitiveness, while the global economic slowdown will also impact CLMV growth.
In 2025, SCB EIC estimates that the CLMV economies will slow down, with Cambodia expected to grow 3.9% (down from 6.0% in 2024), Lao PDR 3.6% (down from 4.3%), and Vietnam 6.3% (down from 7.1%), while Myanmar’s economy is expected to
It will contract by -0.5% (from the previous year’s expansion of 2.3%).
CLMV economies face external risks due to their reliance on US exports, as well as country-specific challenges. For example, Vietnam and Cambodia face global trade risks due to their high reliance on US exports, while Myanmar, Cambodia, and Laos face domestic risks, including political instability and earthquakes, conflicts along the Thai-Cambodian border, and fragile external stability in Laos, which put additional pressure on the region’s economic outlook. However, some countries face macroeconomic and financial vulnerabilities, such as the partial use of the US dollar in some economies, and may be impacted by the direction of US interest rates.
Despite these risks, supportive factors in the first half of the year may provide some economic support, particularly the acceleration of exports ahead, the recovery of the tourism sector, and the improving labor market. Furthermore, ASEAN economies will continue to contribute to tourism and foreign investment inflows in the CLMV countries to some extent.
Country-specific factors
Vietnam’s economy is expected to grow the most in the CLMV region, driven by its role as a manufacturing hub.
Attractive factors include the continued relocation of production bases to the ASEAN region, a stronger domestic supply chain structure, especially in the electronics industry, US import tariffs that were negotiated first and tend to be lower than neighboring countries in the CLM group, and incentives to attract investment, such as the number of free trade agreements (FTAs) and proactive economic reform policies.
Cambodia’s economy is expected to slow due to the impact of expected high US import tariffs and its reliance on the US market, as well as additional pressure from the influx of cheap Chinese goods. Border tensions with Thailand, which could undermine business confidence, could lead to supply shortages and increase inflationary pressures.
However, strong exports and tourism in early 2025 should provide some support for the overall economy throughout the year, while fiscal stability allows the government to implement additional stimulus measures if needed.
Lao PDR may face limited direct risks from US import tariffs, but its domestic economy remains constrained by high accumulated foreign debt and a fragile financial sector plagued by non-performing loans. Although high inflation and the rapidly depreciating kip have improved somewhat, and its resilience to external shocks has gradually increased, as reflected in the proportion of foreign reserves to monthly imports, these structural vulnerabilities continue to put pressure on the economy.
Myanmar’s economy is expected to contract this year as political instability, ongoing internal conflict and the recent earthquake continue to impact business activity and dampen consumption and investment. Given the constraints of monetary policy and fiscal space, as well as a high non-performing loan (NPL) ratio, the economic recovery prospects are limited.
Trade and investment between Thailand and CLMV countries are slowing down.
SCB EIC expects trade trends between Thailand and CLMV countries to slow down due to weak regional demand and uncertainty in the global trade system. Tensions along the Cambodia-Thailand border further exacerbate downside risks. Although direct investment outflows from Thailand to the CLMV region have returned to pre-COVID-19 levels and are distributed across various business sectors, such as finance, insurance, and industrial manufacturing , increasing international political uncertainty and investor caution in the current global climate could slow down investment trends from Thailand.
The Thai-Cambodian conflict could pose multiple risks. Despite a ceasefire agreement, a prolonged border closure could put pressure on international trade trends. Furthermore, investment and tourism sentiment could slow due to instability following the unrest. However, if more Cambodian workers in Thailand gradually return home, the impact on the Thai labor market could be limited, as replacements from other nationalities are still available.
