Myanmar’s growth to decline, says IMF

Yongzheng Yang, deputy chief for Asia-Pacific and leader of the IMF’s mission to Myanmar from October 14-28, said on Friday that growth had softened in the first half of this fiscal year due to slowing demand from major trading partners and weak commodity prices.
There are other factors. “For example, the construction sector slowed down and the agriculture sector is facing challenges because of flooding and low prices of rice,” he said.
However, the economy was expected to rebound in the second half, thanks to expected increases in foreign direct investment and aid inflows.
“The economies around the world will |be up and down over time. But we expect |growth to be stronger than 6.5 per cent next year,” he said. 
Yang warned about inflationary pressures and macroeconomic imbalances. Inflation remains high at around 9 per cent, the current account deficit continues to rise to 7.6 per cent of gross domestic product and the fiscal deficit has increased significantly.
Myanmar still has many bottlenecks such as infrastructure, electricity, transport and capacity constraints, which may lead to a surge in production costs.
“For example, we experienced a number of blackouts during our discussions in May,” Yang said.

Suggestions for government 
The administration needs to prioritise macroeconomic stability by bringing down inflation, strengthening the external position and fortifying the banking industry, said Yang.
The high inflation disrespected the kyat, which has been depreciating against the US dollar over the past few weeks.
 However, many currencies in the region are also suffering from the greenback’s appreciation. 
Myanmar should allow the exchange rate to be flexible in line with market conditions. 
Central bank financing of fiscal deficits should be phased out as a priority, he said.
Prudential regulations should be issued soon to safeguard financial stability and improve financial inclusion. 
State banks should undergo urgent reforms to reduce risks to public finance and the financial system.
Myanmar must focus on domestic revenue mobilisation by rationalising tax exemptions and investment incentives as well as enacting the Tax Administration Procedure Law.
“You should invest in public education on the importance of taxation,” he said. 
“State economic enterprises need more reforms, and the financial sector needs further liberalisation to improve financial inclusion, especially for agriculture and small and medium enterprises.”
Despite the current slowdown, Yang is still optimistic about the nation’s future. 
The recent lifting of sanctions by the United States would positively impact banking |sector functions, thereby improving trading, accelerating financial sector reforms and boosting investment in the nation’s special economic zones.
Yang said he is happy with the govern-|ment’s efforts to streamline business regula-tions, such as by enacting the Financial Institutions Law and Myanmar Investment Law, and continued improvements in revenue administration. 
“It will take some time, but we are confident, as the authorities are making good efforts,” he said.