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10 Feb 2017


Exports to CLMV May Hit 3.8% Growth on Improved Commodity Prices (Current Issue No. 2824)

 CLMV nations will likely continue to be ASEAN's best performing economies, with their average growth projected at 6.5 percent for 2016. Major contributors to this include robust investment and private consumption, indicating that demand remains elevated in those countries. Given this, the CLMV states have, over the past several years, become some of the best export destinations for Thailand, taking over 10.3 percent of our aggregate outbound trade. Their strong GDP growth is estimated to continue this year, with a 6.8 percent increase predicted.

Despite the economic booms there, our shipments to the CLMV have failed to record expansion. The dismal performance in 2016 was confirmed by a contraction of 0.1 percent, while Thailand's totalexports registered a 0.5 percent increase. Commodity prices remained low, and this has been blamed for our subdued outbound trade performance to the CLMV, given that commodities are among our chief products to these markets. Now, amid a recovery in commodity prices, KResearch is optimistic about our performance this year, predicting growth somewhere between 3.3-4.3 percent (median of 3.8 percent), reaching USD23 billion in value.

Thailand's exports to the CLMV, however, will be saddled with not only commodity price cycle, but also several other issues that will probably become more problematic, exposing our CLMV exports to structural issues. These include the fact that some Thai investors now use CLMV countries as production bases, though our exporters are not well-connected with CLMV supply chains; that could hurt the long-term performance of Thailand outbound trade to these markets.

Bearing this in mind, Thai exporters should consider doing larger trade in industrial products to fit into their supply chains, while also giving support to industrial development there. To respond to the higher purchasing power in CLMV's urban areas that are growing proportionally with their expanding middle class population, Thai companies should take interest in selling more consumer products, especially those with high added value, which would improve our export performance over the long run.