World Bank Forecasts Drop in Burma’s Economic Growth
By Kyaw Hsu Mon 5 October 2015
RANGOON — A World Bank report released Monday estimated that Burma’s economic growth for the 2015-16 fiscal year would slow, due in part to recent flooding and a slowdown in new investment.
According to the Bank’s latest “East Asia and Pacific Economic Update,” Burma’s economy grew at 8.5 percent in real terms for the 2014-15 fiscal year, but this growth is predicted to drop to 6.5 percent over the next fiscal year.
The predicted slowdown was due in part, the Bank said, to recent flooding which inundated whole swathes of the country since July. With more than a million acres of paddy fields destroyed, the government halted rice exports—one of the countries key export commodities.
Although the full financial toll of the floods crisis is not yet clear, Dr Soe Tun, joint secretary of the Myanmar Rice Federation, echoed the World Bank’s findings, forecasting that the coming year will likely be a challenging one for Burma’s agricultural sector.
“Because the volume of agro-export items will be less this year, the earnings will also be less. Inflation is another major factor that could impact economic growth in Burma,” he said.
The report estimated that inflation reached about 10 percent in the year to July and could reach 11.3 percent in the coming fiscal year “due to a combination of supply pressures caused by the floods and currency depreciation.”
“Due to inflation, the cost of production is higher than purchasing power, which has especially harmed lower-income people,” Dr. Soe Tun told The Irrawaddy.
The depreciation of the Burmese kyat against the US dollar since early this year has also put a strain on Burma’s economy.
Economist Aung Ko Ko said the value of Burma’s currency had dropped at least 270 kyat against the dollar within six months, and that this didn’t bode well for rising inflation.
“A trade deficit, budget deficit, the dropped value of the kyat, and a decline in export earnings have all been major contributors to the country’s falling GDP,” he said. “When economic growth increased, inflation used to go up, but now, growth has decreased and inflation has still gone up. This isn’t a good thing.”
The record $8 billion in foreign direct investment (FDI) received in 2014-15 was double that of 2013-14. Yet according to Myanmar Investment Commission (MIC) Secretary Aung Naing Oo, less than half—$3 billion—of this investment entered the country, despite the fact that the investment commission approved all $8 billion.
Burma’s top foreign investment sectors are currently power (33 percent), manufacturing (22 percent), oil and gas (20 percent), telecommunications (11 percent), and hotels and tourism (5 percent), according to MIC estimates.
The World Bank reports that Burma’s economic reforms have supported consumer and investor confidence, even in light of various business and sociopolitical challenges. But it predicted new investment would slow as continued economic reforms would “hit a hiatus over the election period.”
The Bank said continued growth was contingent on sustaining progress with broader macro-structural reforms, including strengthening the business environment, modernizing the banking sector, bolstering public debt management, and, crucially, making access to finance a priority for private sector growth.
“Whatever happens, the people will ultimately be the ones to feel the impact. That’s why we’re looking for better policy in the next government,” Aung Ko Ko said.