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Burma Economy Research & Analysis 2017
Following the historical shift to civil government after years of gradual reform, Myanmar is in a phase of extraordinary expansion. Formerly an escape in the area, Myanmar now has the most rapidly expanding economy in ASEAN and is seen as a resource of local power and a target of opportunities. A further liberalization is envisaged, and it is anticipated that global investments will continue to be substantial and the internal economy will become more and more effective.
Whilst many newly industrialising countries are struggling for a high pace of growth in the face of insecurity around the world, Myanmar remains on course. Included in this interview mit U Kyaw Win, Minister für Planung und Finanzen ; Sean Turnell, Economic Advisor, National League for Democracy und Associate Professor, Department of Economics, Macquarie University ; U Thurance Aung, Vice-President, Myanmar Japan Thilwa Development ; und Keiichiro Nakazawa, Chief Representative, Japan International Cooperation Agency, Myanmar Office.
In the Myanmar 2017 review.
Causing Myanmar's economy to slow down and recover
Myanmar's economy has been slowing down and its budget and balance of payments shortfalls have increased under the National League for Democracy in the last two years. Things are stabilizing and the long-term outlook looks good, said Sean Turnell, senior economics advisor to the administration, at the Myanmar Banking & Payments Conference in Yangon on July 24.
Whilst in the near future economic expansion will remain hampered, a series of reform policies led by the NLD administration should "bring macroeconomic instability to the macroeconomic context in which the finance industry can flourish," Turnell said. Myanmar's budget deficits have increased from 3.2% of GNP in 2015-16 to 4.8% in 2016-17.
In 2014-15, under the former Union Solidarity and Development Party administration, the budget shortfall amounted to 1.2% of GNP. "According to the International Monetary Fund, a country's budget deficits should not exceed 5% of GNP, and Myanmar also wants to do so," Turnell said. This has given the present administration very little leeway to raise expenditure and carry out reform in the areas of training, health and infrastructures.
Meanwhile, the CA or TRD deficits have also increased due to delayed export flows in comparison to import and the devaluation of the Kyoto Protocol. Myanmar's trading deficits in 2016-17 were around USD 5.5 billion, with Myanmar's export figures of USD 11.6 billion and USD 17.2 billion, respectively, falling short of those of the import sector, as shown by the Ministry of Commerce.
By contrast, the balance of payments was USD 5.4 billion in 2015-16 and USD 4.9 billion in 2014-15, according to figures from the CSTO. This widening trading gap is due in part to the fall in the value of the national dollar. Myanmar's administration has historically lent from the Federal Reserve to finance its budget shortfalls.
Up to 90% of the budget shortfall was financed by loans from banks at the height of the last year. However, as the Federal Reserve has been printing more cash and US interest rises, the value of the Kyoto Protocol has sunk. FDI under the NLD administration has also declined.
FDI in the years 2016-17 amounted to around USD 7 billion, after more than USD 9 billion in the year before. In spite of the falling figures, Turnell expects the economy to be on the threshold of transformation. "The new administration has published a document setting out a new funding strategy for key banks," he said.
Corresponding to the policies, just 44pc of the 2016-17 tax shortfall will be financed by lending from the Federal Reserve. Thats decreasing to 2018-19 20-pc and from 2019-20, the idea is that no recurring system content faculty be financed by the Federal Reserve," Turnell same. In order to reach its goal, "Myanmar needs to evolve its debt markets and establish an appropriate bidding system to finance the budget deficit," Turnell said.
Myanmar's first sovereign debt campaign took place last September, with the issuance, which yielded between 8.6% and 9.6%, not fully underwritten. Meanwhile, the federal administration is also working to expand its tax network. Further reform is under way to stabilize the balance of payments. "MARKETING the value of Kyoto is crucial," Turnell said.
The entry into force of the new Business Act in Myanmar will also promote greater involvement of businesses from abroad in the area. The new bill, which was presented to Amyotha Hluttaw for regulatory clearance on July 20, allows overseas bankers and businesses to make freer investments in the country's economy, thus increasing much-needed technology expertise and boosting production.
There has been an end to the increase in the budget deficits, and we are hoping that we can start to absorb sound debts in order to boost it. Also, the balance of payments gap has stabilised," he said.