MYANMAR’S economy will continue to grow in the next two years, despite patchy progress on the government’s economic reforms and a slight decline in the pace of expansion last year, the Asian Development Bank (ADB) says.
Newin Sinsiri, the ADB’s country director for Myanmar, told a press conference yesterday that the country could enjoy 6.6 per cent growth in gross domestic product growth this year and 6.8 per cent next year.
“We remain positive about this economy, as Myanmar opens up its retail and wholesale sectors and continues to modernise corporate governance and management,” he said after the release of the Asian Development Outlook report for this year.
Newin expects the country’s growth to be steady in the next few years if the government accelerates the wide range of economic reforms initiated since 2011. He stressed the importance of improvements in both hard and soft infrastructure.
“In order to make agriculture more productive, we need to have good infrastructure in place, and to know how to integrate into the value chain. We need to look at the bigger picture,” he said.
“We need to bring the market close to the production. Better roads and railways as well as reliable 24-hour electricity are critical. When it comes to soft infrastructure, the most important is human capital. We are looking at how we can help the government with technical know-how in its efforts for Industry 4.0.”
According to Newin, infrastructure is the key for advancement in the service and IT industries, and the legal framework is also important in that it ensures people can do businesses easily. He underscored the importance of generating revenue and effective expenditure on much-needed sectors.
“We have to find several ways to generate more revenue and reduce subsidies in some of the areas where people can afford,” he said.
Yumiko Tamura, principal country specialist at the ADB’s Myanmar Resident Mission, said Myanmar’s monetary and fiscal policies are moving in the right direction. She called on people to take advantage of the resources available in the country.
“This country is still receiving a lot of concessional assistance, and the effective use of such concessional ODA (official development assistance) will lead to improvements in infrastructure in social services delivery, of which this country is in real need,” she said.
According to Tamura, interest rate liberalisation is one of the areas that the government is finding it difficult to pursue. The market sentiment is driven by not only by economic growth but also price movements, she said.
“Inflation has been quite high, and the kyat has weakened. This trend will continue, so businesses will probably feel the impacts,” she said.
Yet, she foresees the potential for further growth in Myanmar, driven by higher foreign direct investment (FDI) and growth in core areas such as agriculture, industry and services.
“With good weather, this country can achieve a higher agricultural growth rate. In terms of GDP share, trade and transport are two big sectors. Trade is actually controlled by the private sector, so the private sector sentiment is very important,” she said.
“We expect FDI to be quite steady, and the visitor arrivals, particularly from Asian countries, will stay quite strong. So, tourism-related services may also grow. Another sector is the financial sector, which is actually quite small in its share to GDP, but this sector may benefit from the government’s policies.”
Tamura foresees some inflows of domestic and international investment.
“The government’s vision is quite ambitious, and that will have a good impact on the private sector investment,” she said.
Tamura also warned of the risks to an otherwise bright outlook, including the possible withdrawal of the European Union’s trade preferences for Myanmar, the effect on exports of a slowdown in the major economies, domestic conflicts, and the slow progress in implementing economic reforms.
“One of the challenges is to position this country well in the regional and global value chain,” she said.
“We would like to see a clear policy direction on which particular industries this country would like to position itself in the value chain.”
She urged the government to prepare for the potential impact of things that are beyond its control and which may influence the outlook, including natural disasters and the EU’s decision on trade preferences.