Economic Analysis
Myanmar

Myanmar

Population 51,846 million
GDP per capita 1212 US$
D
Country risk assessment
E
Business Climate
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2014 2015 2016 (e) 2017 (f)
GDP growth (%)8.4 8.0 7.3 6.3 7.5
Inflation (yearly average) (%) 5.9 11.4 9.8 9.1
Budget balance (% GDP) -0.6 -4.8 -4.6 -4.6
Current account balance (% GDP) -2.5 -4.3 -5.1 -5.0
Public debt (% GDP) 29.7 34.3 34.2 34.2

 

(e) Estimate (f) Forecast  

 * tax year (April - March)

STRENGTHS

  • Ongoing democratic transition and opening of the economy
  • Abundant raw materials (rice, teak, minerals, gas and oil)
  • Significant hydroelectric potential
  • Proximity to vibrant economies (India, China, Thailand)
  • Huge tourist potential

WEAKNESSES

  • Danger of serious ethnic conflict
  • Undiversified economy
  • Underdeveloped financial sector

RISK ASSESSMENT

Growth will remain strong

As in 2016, the rate of growth will remain strong in 2017. Economic activity is expected to benefit from the democratic transition made possible by the November 2015 elections and with the National League for Democracy (NLD) taking power in April 2016. In addition, the approving of a new law on investments in October 2016 should also help boost activity, with the country feeling the benefits of vitality of the gas, telecommunications and consumer goods sectors. The development of tourism should also continue despite the lack of hotel accommodation. The construction sector will benefit from the boom in building the new tourism infrastructure. The country is experiencing an influx of foreign investment as its economy is opened up. However, despite the development of special economic zones, its infrastructure remains seriously inadequate, in particular for electricity, which places limits on its production capacity. On top of this, productivity is low and labour relatively unskilled. Whilst the banking sector remains underdeveloped, the supply of credit is growing rapidly and underpinning consumer spending and investment. In addition, the textile and clothing sector will benefit from the re-establishment, approved in September 2016, of the generalized preference system with the United States which will allow Myanmar privileged access to the US market.
Although poverty remains widespread, private consumption, which accounts for 80% of GDP, will continue to support growth and foreign investments in the agri-business sector. It will be further boosted by increases in social expenditure. Inflation, however, will remain at a high level because of the relaxed economic policies and the rapid rise in housing, electricity and food prices.

 

Dual deficits but growing FDI

Efforts to bring the budget deficit under control are expected to continue in 2017. The government is prioritising spending on developing infrastructures as well as social spending (education, healthcare). At the same time, with revenues being restricted by weak natural gas prices, the government wants to push ahead with reforms aimed at increasing the tax base which would help boost budget revenues. In addition, the public debt has been granted debt relief and a rescheduling of the arrears by the Paris Club, enabling the country to receive further concessionary loans to finance investment in its infrastructure. This means public debt is at a moderate and sustainable level.
In terms of the external accounts, the current account deficit should stabilise in 2017. Despite the growth in exports, the country has a balance of trade deficit being widened by the scale of imports linked to investment projects but also high levels of consumption. This is however partly offset by increased FDI. In this context, its currency reserves will remain at a satisfactory level (7 month’s imports).

 

The democratic transition continues but interethnic tensions remain high

In political terms, the country has seen an unprecedented period of liberalisation. The parliamentary election in November 2010, bringing to an end the rule of the military junta, opened the way to a reform process as of summer 2011. Partial parliamentary elections were held in April 2012, the first elections in which all elements of the opposition had taken part since 1990. The National League for Democracy (NLD) won 43 of the 45 seats up for election, enabling Aung San Suu Kyi, leader of the NLD, to become Member of Parliament. In the long-awaited general election of 8 November 2015, the LND won over 80% of the votes. This gave it an absolute majority in Parliament, despite 25% of the seats being reserved for members of the junta. The NLD entered into office in April 2016. Htin Kyaw was elected President by Parliament and Aung San Suu Kyi was appointed “State Counsellor”, a role specifically devised for her as the Constitution prohibits her from becoming President because of her foreign family links. Partial parliamentary elections are due to be held in April 2017. With 12 national Parliamentary seats at stake, this could not threaten the NLD majority but will be the first real test for the party, one year after it came to power.
The opening of the country made it possible, in 2012 and 2013, for most of the sanctions imposed by the United States and the European Union to be lifted. However, relations between Naypyidaw and the west could suffer as a result of the enduring interethnic and religious tensions between the Buddhist majority and the Muslim minority in the State of Rakhine.
Finally, the business climate remains difficult and Myanmar is one of the worst rated countries in the world in terms of quality of governance.

 

Last update: January 2017

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