Myanmar's economy to experience moderate growth: WB
Yangon - Despite optimism on the post-election economy, the World Bank expects Myanmar's economic growth to moderate to 6.5 per cent in the 2015-16 fiscal year due to the severe impacts of the recent floods across the country. In the previous fiscal year
To Abdoulaye Seck, World Bank country manager for Myanmar, floods and the upcoming election are two main reasons leading to the lower projection.
“The first is the devastating floods which hurt the country very much, especially the agriculture sector. The second is something I have seen in many other countries going through a certain time like elections: investors are usually in the waiting mood. They are keeping an eye on what will happen after the elections, and whether the [new] government will continue the reform process,” he said.
Myanmar has recently witnessed a slowdown in foreign direct investment (FDI). Seck considered this a natural reaction and expected a very promising outlook over the next few years.
“We expect Myanmar’s economy to rebound in the 2016-17 fiscal year and beyond, provided that the reform agenda continues,” he said.
The new growth projection was announced yesterday as part of the World Bank’s launch of its “East Asia and Pacific Update and Myanmar Economic Monitor 2015” report. World Bank has projected that Myanmar’s real gross domestic product growth rate will rise to 7.8 per cent in FY2016-17 and 8.5 per cent in FY 2017-18.
“In the last fiscal year, the service sector was the main driver of growth thanks to the expansion of telecommunications and transportation. Agricultural output picked up in 2014-15 after two years of sluggish growth. Manufacturing and industry outputs has also been strong, especially gas. The economic impact of the floods that hit Myanmar in July 2015 is still being assessed, but will likely affect the main rice crop this year,” said Habib Rab, senior country economist.
Some economic indicators posed concerns: Inflation has been rising to around 10 per cent in the past 12 months through July 2015, while the kyat has weakened by around 20 per cent in the past 12 months through August on the back of dollar rise, growing current account deficit and slowing FDI.
Inflation is expected to hit 11.3 per cent in this fiscal year due to supply pressure caused by floods and kyat depreciation. Post-flood demand could also boost imports and pressure the current account deficit.
Both Seck and Rab foresee that driving the economy would be the services, manufacturing and agricultural sectors.
“In the past fiscal year, we saw a big rebound in the agricultural sector. But the potential is still very high because the level of productivity is considerably lower than other countries in the region. And the sector was very severely affected by the floods,” said Rab.
Seck added that the services sector would be a large source of Myanmar’s growth, while FDI should drive the manufacturing sector in the next few years.
Both economists noted that macro-structural reforms such as strengthening the business environment, modernising the banking sector, and strengthening public debt management will drive further growth.
Among challenges that Myanmar is facing are limited access to finance for companies and households, low tax revenue, poor legal framework, efficiency of public expenditures, and the efficiency of local financial institutions and private sector.
