Economic outlook remains favourable: ADB
Myanmar has so far done enough to maintain its bright economic outlook, said a senior official from the Asian Development Bank, adding that the country accomplished this despite several development challenges such as infrastructure shortage and lack of hu
Winfried Wicklein, ADB’s country director for Myanmar, told Myanmar Eleven in an exclusive interview that the development lender expects Myanmar’s growth to remain over 8 per cent in the next few years, thanks to ongoing reforms and a government willingness to create a more-enabling business environment.
"The economy is doing well, and growth can continue," he said. "We expect Myanmar to become an upper middle-income country by 2030. Of course, there may be reaching of a lower middle-income country threshold earlier.
"Essentially the country has to continue to grow somewhere between 8 and 10 per cent. It can be done. It should be done. But (Myanmar) must maintain the reform momentum. This is our message - do not stop any reform. There is so much to catch up."
President Thein Sein's administration has set its target to become a middle-income country at 2020, ten years earlier than the ADB’s projection. On the government target, Wicklein commented that, "we are not talking about different things. It is just a different way of reading the same (data). At ADB, we would like to take the long-term view."
Asian Development Outlook [ADO] 2015, ADB’s publication launched last month, forecasts Myanmar’s economic growth at 8.3 per cent in the 2015-16 fiscal year, which began April 1. According to the report, risks to the economic outlook come from thin external and fiscal buffers, ethnic and sectarian tensions, vulnerability to bad weather and possible slowing of reform momentum ahead of elections later this year.
Wicklein noted that bad weather and election spending are the most important risks to the nation’s outlook. He noted that ADB foresaw some exemptions in indicators in projecting the normalised growth.
"There are a number of risks. Some of them cannot really be addressed by the country itself. So we have to hope that there are no major natural catastrophes and political issues," he said.
The country director said that Myanmar needs to keep an eye on inflation, foreign reserves and the deficit. According to ADO 2015, inflation will likely accelerate to 8.4 per cent this fiscal year, propelled by greater fiscal spending and expected higher wages, which will increase domestic demand. Consumer price pressures should then ease slightly in FY2016-17 to 6 per cent. However, Wicklein does not think inflation is a big risk at the moment, given the higher imports and investment.
According to the ADO 2015, increases in government spending and higher civil service salaries could sharply widen the fiscal deficit to 6.3 per cent of GDP [gross domestic product]. This raises concern because prudent fiscal policy is particularly important to macroeconomic stability when monetary policy tools are limited. It could be a challenge to maintain fiscal discipline ahead of the presidential elections in the fourth quarter of this year.
ADB’s country head summed up Myanmar's major challenges, which include improving infrastructure, strengthening governance and public sector capacity, developing human capital, building a dynamic private sector and revitalising agriculture.