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COUNTRY REPORT – MYANMAR

AN EXPORT DESTINATION?

ECONOMIC UPDATE June 2014.

(Follows earlier reports in September/October 2013 and January/June 2014)

 

Myanmar continues to have accelerating growth with as stable external balance position.   Figures on output growth have now risen to 8 .25% in the fiscal year (FY) 2013/14) April to March).

 

Inflation appears to have stabilized at 6%) year on year) as at April 2014, the exchange rate after depreciation in 2013 has also stabilized. There has been an estimated widening of the current account deficit to around 5.5% of GDP in the period 2013/14.

 

International reserves: The Central Bank of Myanmar has increased reserves to USD4.5 billion at end March which is 2.75 months prospective imports, this is low. 

 

Broad money on the other hand continues to grow with private sector credit also growing rapidly at 32.25% and 59.5% respectively in February.

 

Headline fiscal deficit for 2013/14 is estimated at 1.5% of GDP. A debt sustainability analysis shows that Myanmar is now at a low risk of debt distress.

 

Economic Outlook

 

This is favourable with expected growth of 8.5% in the coming years driven by rising gas production and investment.

 

Inflation should be well controlled at around 6% in the medium term while the current account deficit is also projected to remain stable.

 

International reserves should grow as foreign flows intensify.

 

It is expected the current account deficit will continue to widen to around 5.5% of GDP however one off revenues should bring the deficit down to 4.5% of GDP.

 

Risks: These emanate from thin external and fiscal buffers, in particular due to the authority’s capacity to develop and implement policies and absorb technical assistance being quite stretched at present.  With the entry of foreign banks there will be a burden placed on the present nascent capacity which will also challenge monetary and exchange rate management, in particular in the face of continuing demand pressures on inflation.

 

There are also fiscal risks developing due to tax exemptions being on the increase even as expenditure rises.  There is also growing external borrowings for off-budget operations.

 

On the upside there are large one off inflows from concession fees for oil and gas exploration that will come on stream in the near term

 

 

 

 

 

Myanmar: Selected Economic Indicators

 

 

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

       

 

 

 

 

Est.

Proj. 

       

Output and prices

(Percent change)

       

Real GDP (authorities)

10.4

5.9

7.3

8.7

9.1

       

Real GDP (IMF  estimates)

5.3

5.9

7.3

8.3

8.5

8.5

       

CPI (end-period)

8.9

-1.1

4.7

6.3

5.9

6.7

       

CPI (period average)

8.2

2.8

2.8

5.7

6.6

6.3

 

 

 

   

Balance of Payments

(Percent of GDP, unless otherwise indicated)

       

Current account balance

-1.2

-1.9

-4.3

-5.4

-5.3

-5.1

       

Trade balance

1.3

-0.3

-3.8

-4.7

-3.8

-4.3

       

Exports

17.8

18.2

18.6

21.5

22.9

22.6

       

Imports

-16.5

-18.6

-22.4

-26.2

-26.7

-27.0

       

Financial account

2.9

3.7

9.2

9.0

8.2

8.3

       

Foreign direct investment, net

4.5

3.7

5.0

4.6

5.1

5.2

       

Overall balance

-0.9

-1.6

3.8

2.6

2.9

3.2

       

CBM reserves

 

 

 

 

 

 

       

In millions of U.S. dollars

850

922

3,062

4,546

6,439

8,783

       

In months of total imports

0.9

0.8

2.2

2.9

3.5

4.3

       

External debt

 

 

 

 

 

 

       

Total external debt (billions of U.S. dollars)

14.4

15.3

13.7

10.9

11.9

13.4

       

(In percent of GDP)

29.0

27.3

24.6

19.2

18.2

18.2

       

Of which: External debt arrears (billions of U.S. dollars) 3/

9.9

10.8

4.8

0.0

0.0

0.0

       

Terms of trade (in percent change)

0.0

2.0

-2.2

-0.4

-0.5

-0.4

       

Exchange rates (kyat/$, end of period)

 

 

 

 

 

 

       

Official exchange rate

5.4

5.6

880

964

       

Parallel rate

861

822

878

965

       
                       

Source: IMF Selected data and Myanmar authorities

John Brooks

Trade Economist

The Auspacific Institute

6 October 2014