The Asian Development Bank predicts growth in Myanmar’s Gross Domestic Product (GDP) will reach 7.2 per cent by 31st September, 2018.
GDP growth picked up in FY 2017-2018, to 6.8 per cent, while the current account deficit widened. With continued economic reform, growth should be sustained this year and accelerate to 7.2 per cent next year, said Mr. Newin Sinsiri, ADB’s Country Director for Myanmar.
Agriculture, which constitutes 30 per cent of GDP, grew 3.5 per cent in FY 2017-2018, compared to the previous FY 2016-2017. The industry and service sectors maintained growth estimated to exceed 8 per cent. Exports are expected to increase by 15 per cent in FY 2017-2018, mainly driven by a record high of rice shipments and high demand for garments. Also, the Ministry of Hotels and Tourism reported tourist arrivals up by 18 per cent in 2017. Each of these improvements are contributing factors to GDP growth during the last FY 2017-2018. The ADB made a statement regarding possible growth in Myanmar’s GDP in the medium term and coming fiscal year, based on information from FY 2017-2018, said Ms. Yumiko Tamurao, Principal Country Specialist of ADB. Inflation rates during last FY 2016-2017 stood at 6.8 per cent, and fell to 5.3 per cent. Subdued international grain prices, slower monetary expansion and a stable exchange rate helped control the inflation rate, however, it began edging up in September 2017. Import values soared to 12 per cent in FY 2017-2018, with a 2.4 per cent contraction in FY 2016-2017. High import values are attributed to increasing domestic consumption and demand for capital goods to supply infrastructure projects. The fiscal deficit is estimated to have widened to the equivalent of 3.5 per cent of GDP in FY 2017-2018, which is up from 2.5 per cent in FY 2016-2017, as the government increased expenditures on electric power infrastructure, health care, education and social welfare.
Inflation will continue edging up due to higher growth and expected increases in international oil prices. Inflation is expected to accelerate to 6.2 per cent in 2018, before moderating slightly to 6 per cent in 2019. Additionally, the fiscal deficit is projected to remain near 4 per cent of GDP over the next two years, as the government increases public spending, with an attempt to support the socio-economic development agenda.
ADB also pointed out that with underdeveloped capital markets, Myanmar cannot hope to attract sizable portfolio capital inflows in the near future. FDI will be the main source of financing to narrow the current account deficit. FDI can help tap into export-orientated production of labour-intensive goods.
Myanmar has enacted the Myanmar Company Law. It is seen as a positive development to attract foreign investments. Continued efforts towards a more conducive business climate will attract FDI. In a bid to promote investments, Myanmar should exercise best practices of regional countries for screening and approval procedures for foreign investment, foreign equity holdings, control over capital repatriation by foreign enterprises, working processes to seek construction permits, tax incentives and property registries. Government initiatives to formulate a 238 point economic policy agenda, set out in the draft Myanmar Sustainable Development Plan, should keep investors engaged. Building on these initiatives, policy makers should implement reform expeditiously and effectively to buoy investor confidence and attract sizable FDI in the years to come, ADB urged. “We definitely welcome the government’s positive direction in preparing medium term and long term strategy which will guide all of us, not just the public finance sector, but also the private sector players, to decide where investments may be needed or might be encouraged”, said Ms. Yumiko Tamura.
ADB held a press conference, entitled, “Asian Development Outlook 2018,” at the Pan Pacific Hotel, Yangon, yesterday.
May Thet Htin