Agriculture provides the bulk of Myanmar’s exports. Source: Asean Economist
After two years of impressive growth and macroeconomic stability, Myanmar faced a more difficult economic environment in 2015-16, the World Bank reported.
Economic growth declined but remained strong at 7 per cent during the last financial year, compared with 8.5 per cent in 2014-15, according to the World Bank’s May 2016 Myanmar Economic Monitor.
Heavy flooding, a slowdown in new investment during the landmark election year and a more challenging external environment, including lower commodity prices, affected the already-feeble export sector.
The agriculture sector is, however, projected to recover over the short term.
The monitor said exports declined by 12 per cent in nominal terms in the first three quarters of 2015-16 year-on-year due to the agriculture supply shock and falling commodity prices. The trade deficit has grown and put pressure on the exchange rate. “Ongoing structural constraints, short-term exchange rate pressures, rising inflation peaking at 16 per cent in October 2015 and the recent political transition have contributed to a deceleration in new investment flows,” the World Bank said.
“While Myanmar’s economic growth has eased in this past year, it still remains a powerful engine of change and development for the people of Myanmar,” it added.
The country manager Abdoulaye Seck said: “Growth prospects are positive provided a continued focus by the government on structural reforms and on maintaining macroeconomic stability.”
Real GDP growth is projected to rise to a whopping 7.8 per cent in 2016-17, and average 8.2 per cent per year over the medium-term. Farming, the backbone of the economy, is projected to bounce back over the short-term, while investor demand for services and infrastructural investment are expected to be the main drivers of the economy.
In the short-term, the government was advised to balance a reduction in the deficit and prudent public debt management with an increase in spending for public services and growth.
“Ongoing revenue administration and policy reforms, together with more efficient spending, are expected to contribute to macroeconomic stability in Myanmar, whilst enabling the government to expand public services,” said World Bank regional manager Mathew Verghis.
Myanmar’s budget deficit is projected to average 3.5 per cent of GDP over the medium-term which could rise to around 14 per cent by 2017-18.
The report also advised reform in electricity provision and state-owned banks.