2012-10-12 15:48:16 - Recently published research from Business Monitor International, "Cambodia, Laos and Myanmar Business Forecast Report Q4 2012", is now available at Fast Market Research
Reforms Rolling On Myanmar's recent by-elections were a watershed event in more ways than one, as the NLD romped to a lopsided victory by picking up 44 out of a total 46 contested seats. The elections, which were widely praised as remarkably free and fair, provided a strong measure of the progress of the ruling USDP's reform credentials. However, as evidenced by the recently declared state of emergency in Rakhine state, the government continues to face considerable domestic constraints that pose serious risks to the country's ability to reform both politically and economically while adhering to international human rights guidelines. Still, with continued reforms likely to begin to unleash Myanmar's considerable economic potential, we have revised the country's average annual
growth forecast through 2021 upwards to 7.0% from 5.0%. Post-flood recovery will dominate Cambodia's economic and political outlook in 2012. The ruling Cambodian People's Party (CPP) has pushed through a relatively expansionary 2012 budget, which aims to ramp up overseas borrowing. While the country's external account and fiscal account metrics are far from benign, we expect concessional lending will be sufficient enough to meet the government's financing requirements. Economic growth will, however, be harder to come by in 2012, as resources are diverted towards reconstruction efforts and a deterioration in external demand dims the country's investment and export outlook. We are forecasting a moderation in real GDP growth to 4.8% in 2012, from a projected 6.3% in 2011. Over the long term, Cambodia will remain one of the brightest frontier market growth stories in Asia. The introduction of the country's stock exchange in 2011 should help to improve access to corporate financing over the long term and attract greater levels of foreign private sector investment. While we view the government's recent reforms as a positive for the business environment and the broader economy, we believe that businesses will continue to face significant headwinds within Laos. The lack of access to credit by smaller business and the purported lack of the flow-on effects from investments to the local community may lead to inequitable growth in Laos' economy, which may in turn hamper its longer-term growth prospects. While we acknowledge the economic advantages that have come alongside closer economic and political links with China, we believe that Beijing's growing influence over Vientiane may be detrimental for Laos in the long term. Laos risks sacrificing its sovereignty and becoming politically impotent, losing its policymaking abilities should China's influence be allowed to grow unfettered.
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