Myanmar’s economy picking up again ahead of next year’s elections

Myanmar’s Economy Picking Up Again Ahead Of Next Year's Elections
Government district in Naypyitaw, Myanmar © Arno Maierbrugger

Myanmar’s GDP is projected to grow by 6.6 per cent in 2020, slightly higher than the 6.5-per cent projection for this year, according to the annual World Bank East Asia and Pacific Economic Update. In the following years, economic growth is expected to further increase to 6.7 per cent in 2021 and 6.8 per cent in 2022. 

Following an economic slowdown from 6.8 per cent in 2018 to 6.5 per cent in 2019 amid a slack in the services sector and high inflation, “growth is expected to pick up gradually in the medium term,” the report said.

The news come as the country is preparing for a general election next year after a partly erratic economic policy by the National League for Democracy which took over power in 2015.

The World Bank report said that growth in 2020 will be primarily driven by investments in the manufacturing, insurance and construction sectors and supported by market reforms. Policy reform measures like liberalisation of the insurance industry, visa-free policy for more foreign countries, tax amnesty scheme to mobilise hidden capital, among others, are expected to bear fruit.

However, the economy remains exposed to persistent downside risks, including natural disasters that still pose a huge uncertainly to the agriculture-dominated economy. According to the ASEAN information cenere, Myanmar experienced three floods and one storm in the first nine months of 2019.

Meanwhile, the impact of inflation and recently increased electricity tariffs to the general public remains to be monitored, while the ripple effect of the unresolved Rakhine crisis and persistent conflict drags on, the World Bank said.

It, however, noted that Myanmar’s positive trend in poverty reduction is expected to continue due to strong growth. The poverty rate halved from 48 to 25 per cent between 2005 and 2017, based on the national poverty line. But still, poverty in Myanmar is 2.7 times higher in rural areas than in urban areas and limited agricultural growth suggests that poor agricultural households continue to see slower progress.

The bank forecast that the expected pick-up in manufacturing and construction could further accelerate poverty declines at least in urban areas, by providing low-skill employment opportunities for members of poor households.

Soe Win, Minister of Planning and Finance, conceded that the country’s economic development may not be satisfactory, but said the government has “managed to stabilise our financial sector to some extent by making our monetary and fiscal policy transmissions effective as much as possible with limited financial instruments we have at hand.” 

Foreign investors remain cautious. Myanmar’s approved annual foreign direct investment has been in steady decline since the 2015 elections, from $9.5 billion to $5.6 billion in 2018, with a slim chance to recover this year.

The ongoing US-China trade war impacted the country less than favourably, though many businesses have previously urged the government to take advantage of the opportunities from the rift, such as taking measures to attract international manufacturers to move their factories to Myanmar.

“But while companies are searching for ways to avoid tariffs, it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short-term due to inadequate infrastructure and small scales of production,” said Andrew Mason, World Bank Lead Economist for East Asia and the Pacific.

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Government district in Naypyitaw, Myanmar © Arno Maierbrugger Myanmar’s GDP is projected to grow by 6.6 per cent in 2020, slightly higher than the 6.5-per cent projection for this year, according to the annual World Bank East Asia and Pacific Economic Update. In the following years, economic growth is expected to further increase to 6.7 per cent in 2021 and 6.8 per cent in 2022.  Following an economic slowdown from 6.8 per cent in 2018 to 6.5 per cent in 2019 amid a slack in the services sector and high inflation, “growth is expected to pick up gradually in the...

Myanmar’s Economy Picking Up Again Ahead Of Next Year's Elections
Government district in Naypyitaw, Myanmar © Arno Maierbrugger

Myanmar’s GDP is projected to grow by 6.6 per cent in 2020, slightly higher than the 6.5-per cent projection for this year, according to the annual World Bank East Asia and Pacific Economic Update. In the following years, economic growth is expected to further increase to 6.7 per cent in 2021 and 6.8 per cent in 2022. 

Following an economic slowdown from 6.8 per cent in 2018 to 6.5 per cent in 2019 amid a slack in the services sector and high inflation, “growth is expected to pick up gradually in the medium term,” the report said.

The news come as the country is preparing for a general election next year after a partly erratic economic policy by the National League for Democracy which took over power in 2015.

The World Bank report said that growth in 2020 will be primarily driven by investments in the manufacturing, insurance and construction sectors and supported by market reforms. Policy reform measures like liberalisation of the insurance industry, visa-free policy for more foreign countries, tax amnesty scheme to mobilise hidden capital, among others, are expected to bear fruit.

However, the economy remains exposed to persistent downside risks, including natural disasters that still pose a huge uncertainly to the agriculture-dominated economy. According to the ASEAN information cenere, Myanmar experienced three floods and one storm in the first nine months of 2019.

Meanwhile, the impact of inflation and recently increased electricity tariffs to the general public remains to be monitored, while the ripple effect of the unresolved Rakhine crisis and persistent conflict drags on, the World Bank said.

It, however, noted that Myanmar’s positive trend in poverty reduction is expected to continue due to strong growth. The poverty rate halved from 48 to 25 per cent between 2005 and 2017, based on the national poverty line. But still, poverty in Myanmar is 2.7 times higher in rural areas than in urban areas and limited agricultural growth suggests that poor agricultural households continue to see slower progress.

The bank forecast that the expected pick-up in manufacturing and construction could further accelerate poverty declines at least in urban areas, by providing low-skill employment opportunities for members of poor households.

Soe Win, Minister of Planning and Finance, conceded that the country’s economic development may not be satisfactory, but said the government has “managed to stabilise our financial sector to some extent by making our monetary and fiscal policy transmissions effective as much as possible with limited financial instruments we have at hand.” 

Foreign investors remain cautious. Myanmar’s approved annual foreign direct investment has been in steady decline since the 2015 elections, from $9.5 billion to $5.6 billion in 2018, with a slim chance to recover this year.

The ongoing US-China trade war impacted the country less than favourably, though many businesses have previously urged the government to take advantage of the opportunities from the rift, such as taking measures to attract international manufacturers to move their factories to Myanmar.

“But while companies are searching for ways to avoid tariffs, it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short-term due to inadequate infrastructure and small scales of production,” said Andrew Mason, World Bank Lead Economist for East Asia and the Pacific.

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