ADB Forecasts Myanmar's Economy to Resume Growth This Year
By Nan Lwin 4 April 2019
YANGON — The Asian Development Bank (ADB) expects Myanmar’s economy to resume growth this year and continue to expand in the next thanks to more foreign investment and a positive response to the government’s economic and policy reforms.
The Asian Development Outlook 2019 forecasts Myanmar’s economy to grow by 6.6 percent in 2019 and by 6.8 percent in 2020. Last year, Myanmar’s growth slowed to 6.2 percent, down from 6.8 percent in 2017.
The ADB said foreign direct investment (FDI) approvals in Myanmar nearly doubled from $823 million between October 2017 and January 2018 to about $1.5 million over the same period a year on. The growth came from Singapore and other Asian investors taking larger stakes in the country’s manufacturing and service sectors.
According to the Myanmar Investment Commission (MIC), Singapore became Myanmar’s top investor after committing more than $20 billion, surpassing China as of February. Last month the MIC announced that FDI flows into Myanmar increased for the first time since State Counselor Daw Aung San Suu Kyi took office in early 2016.
“A recent policy measure to standardize FDI application and implementation procedures should further strengthen prospects for FDI inflows in the near term,” the ADB said.
Its report said growth in the service sector was expected to reach 9 percent this year if tourism revives at the beginning of the dry season in October and that other sectors should also see some growth.
However, growth in agriculture was projected to slow from 2 percent during April–September 2018 to 0.5 percent this year “following floods in mid-2018 that likely affected harvests, especially of rice in November.”
The report said inflation was expected to ease to 6.8 percent this year as international oil prices soften. Last year, higher international oil prices and kyat depreciation against the U.S. dollar drove up inflation from 4 percent to 7.1 percent. However, inflation is expected to rise again in 2020 to 7.5 percent as Myanmar’s economic growth gains momentum.
According to the report, the trade deficit is expected to widen this year and next as export earnings weaken and imports strengthen on the back of growing investment, particularly by the government. It said that even if net service receipts improve with a pickup in trade and tourism-related business, the current account deficit was forecast to widen to 4 percent this year and 5 percent the next.
“Fiscal and monetary policies will likely strive to remain supportive of growth while maintaining macroeconomic stability,” the ADB said.
According to the report, external risk would increase if the European Union withdraws Myanmar’s privileges under the Generalized System of Preferences, affecting 10 percent of exports from Myanmar. Domestic risks may include lackluster progress on economic reform and communal tensions flaring in conflict-affected areas.
The government has continued to reform since April 2016, announcing a number of strategic planning initiatives such as the Myanmar Sustainable Development Plan 2018–2030, National Education Strategic Plan 2016–2021 and Myanmar National Health Plan 2017–2021.
“Building on these initiatives, the country needs to accelerate reform which will contribute to inclusive development,” the ADB said.
However, the ADB warned that “Reform to public financial management should aim for greater fiscal prudence, transparency, and efficiency. It should also include strengthened Treasury functions, more systematic public investment planning and implementation, and the adoption of appropriate accounting and auditing standards to make public spending more productive.”
“Myanmar could become more competitive by further strengthening its legal and regulatory framework toward improving the business and investment climate, which would also spur integration into regional and global value chains,” the report said.