Myan­mar’s econ­omy pro­jected to pick up

Mizzima Business Weekly - - CONTENTS -

De­spite im­por­tant risks, Myan­mar’s econ­omy is ex­pected to re­cover this year, with growth ris­ing from 5.9 per­cent in 2016 to 6.4 per­cent. Pub­lic and pri­vate in­vest­ments in pri­or­ity in­fra­struc­ture ser­vices such as power and trans­porta­tion are pro­jected to pick up and in­fla­tion is ex­pected to ease fur­ther, ac­cord­ing to the Oc­to­ber 2017 edi­tion of the Myan­mar Eco­nomic Mon­i­tor. The coun­try has the po­ten­tial to cap­i­tal­ize on ma­jor in­vest­ment op­por­tu­ni­ties as global growth con­tin­ues to re­cover, but faces sev­eral risks to growth. The coun­try’s re­cent de­te­ri­o­ra­tion in se­cu­rity in Rakhine State could neg­a­tively af­fect in­vest­ment flows al­ready af­fected by in­vestor per­cep­tions of slow­ing re­forms, and ex­ac­er­bate ex­ist­ing risks re­lated to vul­ner­a­bil­ity to shocks in­clud­ing nat­u­ral dis­as­ters.

De­spite no­table re­forms and strong for­eign in­vest­ment com­mit­ments in Myan­mar, im­ple­men­ta­tion is lag­ging. The Myan­mar Eco­nomic Mon­i­tor sug­gests Myan­mar build on, and com­mu­ni­cate, im­por­tant re­forms al­ready un­der­way, for in­stance in ac­cess to fi­nance, elec­tric­ity and land, busi­ness reg­u­la­tions and la­bor force skills, to boost in­vestor con­fi­dence. Im­proved global growth prospects and con­tin­ued strong do­mes­tic de­mand un­der­pin a pos­i­tive out­look for Myan­mar’s de­vel­op­ing neigh­bors in the re­gion, says the Oc­to­ber 2017 edi­tion of the East Asia and Pa­cific Eco­nomic Up­date also launched to­day. Stronger growth in ad­vanced economies, a mod­er­ate re­cov­ery in com­mod­ity prices, and a re­cov­ery in global trade growth, will sup­port the economies of de­vel­op­ing East Asia and Pa­cific to col­lec­tively ex­pand by 6.4 per­cent for 2017.

The re­port states that the uptick in growth in 2017 rel­a­tive to ear­lier ex­pec­ta­tions re­flects stronger than ex­pected growth in China, at 6.7 per­cent, the same pace as in 2016. In the rest of the re­gion growth in 2017 will be rise to 5.1 per­cent in 2017 and 5.2 per­cent in 2018, up from 4.9 per­cent in 2016. Sev­eral ex­ter­nal and do­mes­tic risks could im­pact this pos­i­tive out­look. Eco­nomic poli­cies in some ad­vanced economies re­main un­cer­tain, while geopo­lit­i­cal ten­sions cen­tered on the re­gion have in­creased. Mon­e­tary poli­cies in the U.S. and the Euro Area could be tight­ened more quickly than ex­pected. Many coun­tries in the re­gion have high lev­els of pri­vate sec­tor debt while fis­cal deficits re­main high or are on the rise. “The re­cov­ery of the global econ­omy and the ex­pan­sion of global trade are good news for the East Asia and Pa­cific re­gion and its con­tin­ued suc­cess in im­prov­ing liv­ing stan­dards,” said Vic­to­ria Kwakwa, World Bank Vice Pres­i­dent for the East Asia and Pa­cific Re­gion. “The chal­lenge will be for coun­tries to strike a bal­ance be­tween pri­or­i­tiz­ing short-term growth and re­duc­ing medium-term vul­ner­a­bil­i­ties, so that the re­gion has a stronger foun­da­tion for sus­tained and in­clu­sive growth.” Thai­land and Malaysia are ex­pected to grow more rapidly than ex­pected, due to stronger ex­ports, in­clud­ing tourism, for the for­mer, and in­creased in­vest­ment in the lat­ter. Gains in real wages are fu­el­ing strong con­sump­tion in Indonesia, and a re­bound in agri­cul­ture and man­u­fac­tur­ing is boost­ing growth in Viet­nam.

In the Philip­pines, the econ­omy is pro­jected to ex­pand at a slightly slower pace than in 2016, partly due to slower than ex­pected im­ple­men­ta­tion of pub­lic in­vest­ment projects. Growth in Cam­bo­dia and Lao PDR is mod­er­at­ing com­pared to 2016, but its pace re­mains higher than other coun­tries in the re­gion; trade and FDI in Cam­bo­dia and ex­pan­sion of the power sec­tor in Lao PDR are the main driv­ers. “The im­proved prospects for global growth of­fer a win­dow of op­por­tu­nity for coun­tries to re­duce vul­ner­a­bil­i­ties while pur­su­ing re­forms that can yield growth div­i­dends over the longer term,” said Sud­hir Shetty, World Bank Chief Econ­o­mist for the East Asia and Pa­cific re­gion. “Re­duc­ing risks to fi­nan­cial sec­tor sta­bil­ity and strength­en­ing com­pet­i­tive­ness, in­clud­ing through deeper re­gional in­te­gra­tion, re­main pri­or­i­ties.”

To main­tain re­silience against risks, the re­port calls for a move away from mea­sures aimed at short-term growth to­wards poli­cies that ad­dress fi­nan­cial sec­tor and fis­cal vul­ner­a­bil­i­ties. Th­ese mea­sures in­clude: strength­en­ing su­per­vi­sion and pru­den­tial reg­u­la­tion in coun­tries ex­pe­ri­enc­ing rapid growth in pri­vate-sec­tor credit and debt; re­form­ing tax poli­cies and ad­min­is­tra­tion to help boost rev­enue col­lec­tion; and be­ing ready to tighten mon­e­tary pol­icy if war­ranted by the pace of in­ter­est rate in­creases in ad­vanced economies. Struc­tural re­form pri­or­i­ties dif­fer across coun­tries. Sus­tained re­forms of the state-owned en­ter­prise sec­tors in China and Viet­nam can im­prove growth prospects. The Philip­pines, Thai­land, Lao PDR and Cam­bo­dia will ben­e­fit from con­tin­ued im­prove­ments in pub­lic in­vest­ment man­age­ment sys­tems to sup­port ex­pand­ing pub­lic in­fra­struc­ture pro­grams. In Indonesia, lib­er­al­iz­ing the reg­u­la­tions for for­eign in­vest­ment re­mains im­por­tant.

The re­port also high­lights the po­ten­tial that tourism de­vel­op­ment and deeper re­gional in­te­gra­tion of­fer to off­set the risks of pro­tec­tion­ism. Growth in tourism, if well man­aged, has the po­ten­tial to yield sub­stan­tial ben­e­fits to the re­gion, in­clud­ing for the Pa­cific Is­land Coun­tries. The ASEAN Eco­nomic Com­mu­nity of­fers one av­enue for pro­mot­ing fur­ther re­gional in­te­gra­tion, in­clud­ing by fur­ther lib­er­al­iz­ing trade in ser­vices and re­duc­ing non-tar­iff bar­ri­ers. De­spite suc­cess in re­duc­ing poverty, high and ris­ing in­equal­ity is a grow­ing con­cern, as are fall­ing mo­bil­ity and grow­ing eco­nomic in­se­cu­rity. For last­ing in­clu­sive growth, mea­sures to re­duce ex­treme poverty where it still ex­ists must be ac­com­pa­nied by poli­cies that broaden ac­cess to qual­ity ser­vices and more pro­duc­tive jobs, and stronger so­cial pro­tec­tion sys­tems that re­duce the con­se­quences of ad­verse shocks.

To main­tain re­silience against risks, the re­port calls for a move away from mea­sures aimed at short-term growth to­wards poli­cies that ad­dress fi­nan­cial sec­tor and fis­cal vul­ner­a­bil­i­ties.

A farmer har­vest­ing his crop in field out­side Man­dalay city. Photo: Bo Bo for Mizzima

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