- CLMV growth in 2026 set to moderate. SCB EIC projects CLMV economic growth to moderate to 5.6% in 2026, down from 6.4% in 2025, reflecting the full-year impact of higher U.S. tariffs and softer global growth.
- U.S. tariff pressures intensify. The full-year effect of elevated U.S. tariff rates, coupled with risks from transshipment and sector-specific tariffs, is expected to weigh on trade-dependent CLMV economies. These challenges are further compounded by potential import flooding from China.
- Domestic resilience offers only partial support. While domestic demand provides some buffer, structural vulnerabilities persist. Rising NPL risks remain a key concern, with Lao PDR facing high debt burdens and currency volatility, and Cambodia and Myanmar constrained by political uncertainty.
- Vietnam continues to outperform. Vietnam’s growth remains relatively robust, underpinned by strong domestic consumption, resilient FDI inflows, and ongoing government reforms.
- Thailand’s regional trade and investment softens. Trade and investment flows are expected to moderate in 2026 amid weaker regional demand, heightened global trade uncertainty, and rising political risks. Selective opportunities remain in sectors leveraging resource endowments, geographic advantages, and cost competitiveness.
Growth Softens in 2026 amid External Headwinds and Structural Risks
SCB EIC expects CLMV growth to slow to 5.6% in 2026, down from 6.4% in 2025, as higher U.S. tariffs weigh on export momentum and risks from transshipment and sectoral-specific tariff measures persist. A global economic slowdown is expected to further dampen external demand for goods and services. Despite a temporary U.S.–China trade deal, China’s continued reliance on manufacturing and exports raises risks of import flooding into the region, while some CLMV economies may also face additional pressure from increased inflows of U.S. products following the agreement.
Domestic demand will provide some cushion against external headwinds, but structural challenges remain. Private consumption and investment are likely to soften amid slower economic growth and heightening household vulnerability. Although currency and inflation stability have improved and foreign-exchange reserves remain adequate, financial-sector soundness is a concern as non-performing loans (NPLs) have risen since COVID-19 and are expected to stay elevated as restructuring measures fade.
Economic divergence within CLMV is becoming more pronounced. Vietnam continues to outperform, supported by relocation benefits, strong FDI inflows, and ongoing reforms, despite trade-policy uncertainty. In contrast, other economies face country-specific risks, including political unrest and election uncertainty in Myanmar, border tensions in Cambodia weighing on consumption and investment, and high external debt and currency volatility in Lao PDR.
In 2026, SCB EIC projects slower growth across CLMV economies (except Myanmar). Cambodia is expected to grow by 4.1% (down from 4.6% in 2025), Lao PDR by 4.0% (from 4.4%), Vietnam by 6.6% (from 8.0%), and Myanmar by 1.1% (from -0.5%).
Vietnam Outperforms amid Uneven Recovery across Other CLMV Economies
Vietnam’s economy is expected to slow in 2026, as key growth drivers expand at a more moderate pace in line with softer global growth conditions. The slowdown will be driven primarily by exports, as the impact of U.S. tariffs becomes more pronounced and external downside risks increase. Nevertheless, Vietnam’s growth will remain relatively robust, supported by resilient FDI inflows, ongoing government support measures, and structural reforms. Tourism will continue to play a critical role in driving growth and employment, while accommodative fiscal and monetary policies will help cushion external shocks. However, downside risks have risen, particularly in the export sector, amid heightened global uncertainty.
Cambodia is projected to see growth moderation as exports—particularly to the U.S.—slow and competition from rising Chinese imports intensifies. Border tensions with Thailand are weighing on the economy through weaker investment sentiment, softer tourist arrivals due to security concerns, and lower remittances as workers return from Thailand. While fiscal stability offers some buffer and remains less concerning than among peers, limited government revenue and high external debt could constrain policy support.
Lao PDR is expected to grow at a moderate pace, supported by improved macroeconomic stability from easing inflation and reduced kip volatility. The impact of U.S. tariffs remains limited given minimal exposure to the U.S. market. However, risks persist, particularly from high state-owned enterprises (SOEs)-related debt and constrained capacity to absorb further external shocks.
Myanmar is likely to experience a modest recovery as economic activity gradually rebounds from the 2025 earthquake. However, the recovery will remain fragile, constrained by persistent internal conflicts, weak private consumption amid high inflation and poverty, and challenging business conditions. Macroeconomic policy support remains limited, as elevated inflation, a weak currency, and rising fiscal and debt pressures restrict both fiscal and monetary policy space. Additionally, the upcoming election is unlikely to deliver meaningful policy or economic changes and may add to downside risks.
Moderating Trade and Investment Flows between Thailand and CLMV in 2026
Trade between Thailand and CLMV began to slow in Q3/2025, with Cambodia contributing the largest drag. This trend is expected to persist into 2026 as economic growth moderates in both Thailand and CLMV amid weak external demand and heightened global uncertainty, constraining trade and investment momentum. Structural vulnerabilities—including political uncertainty, high external debt, and financial stability risks—continue to weigh on investment inflows across the region.
Despite these headwinds, CLMV economies are projected to maintain positive growth in 2026, albeit at a slower pace. Selective investment opportunities remain in sectors leveraging natural resources, geographic advantages, and cost competitiveness, offering potential for business seeking long-term strategic positioning.
Read more… https://www.scbeic.com/en/detail/product/clmv-outlook-jan26-en
