Htet Tayza discusses new figures which suggest that Myanmar’s economic growth, which declined in 2015, will recover throughout the year ahead.
Figures from the Asian Development Bank (ADB), a regional development organisation, suggests that Myanmar’s economic growth declined to 7.2% in the last fiscal year. The organisation explained that this was due to widespread flooding and landslides, which limited economic activity. Regional news portal The Bangkok Post reports that ADB is more positive about the current fiscal year, which ends 31st March, 2017.
ADB expects Myanmar’s economic growth to expand by a more impressive 8.4% in the 2016 fiscal year. According to the Bangkok Post, ADB said that Myanmar’s foreign direct investment (FDI), a crucial driver of economic activity, should remain level throughout the year ahead. They further estimated that inflation will moderate, though remain at a high of 9.5%, in the 2016 fiscal year, before depreciating further to 8.5% in the 2017 fiscal year.
Commenting on the release of this data, ADB Country Director in Myanmar Winifried Wicklein said: “Though economic reforms implemented since 2011 have had positive outcomes, Myanmar’s new government will face the challenges of advancing economic reform, addressing infrastructure and labour shortages, and making progress towards peace and social cohesion.”
“Moreover, intensified efforts are needed to connect and develop rural areas to improve access to markets and services, and to generate opportunities and jobs.” ADB named a number of risks to Myanmar’s economic outlook including “thin external and fiscal buffers,” “the capacity of the government to maintain reform momentum” and “vulnerability to bad weather.” ADB emphasised that Myanmar needs to focus on upgrading its transport infrastructure to aid economic growth.
ADB suggested that Myanmar should invest £60 billion (bn) into its transport infrastructure by 2030 to reach the same standard as other countries at a similar stage of development. ADB Deputy Country Director in Myanmar Peter Brimble said: “This means increasing transport sector investments to the equivalent of 3% to 4% of gross domestic product from little more than 1% in recent years… Private sector resources will need to be mobilised given the immense funding requirements.”
Attracting new investment
This is not the first time that Brimble has suggested that private sector resources could provide Myanmar with the investment required to bolster infrastructure. Data indicates that Myanmar’s energy sector needs between US$30 billion (bn) and US$40bn of investment in the next 15 to 20 years. Myanmar expects International Financial Institutions (IFIs) to supply the majority of the investment, but there will be a shortfall, which Brimble suggested could be plugged by foreign direct investment (FDI).
As the International Monetary Fund points out, the benefits of FDI are far from just monetary. Attracting FDI also allows the host country to benefit from outside support in areas such as employee training and the free-flow of technology between the two economies. ADB’s report further highlights the idea that by implementing legislation to encourage FDI, such as the Companies Act, which will allow overseas investors to trade on the YSX, Myanmar can lift its economy to greater heights.