The International Monetary Fund (IMF) has revised its forecast for Myanmar’s economic outlook for this fiscal year, predicting the country’s rapid economic expansion to continue despite inflationary pressures.
The Paris-based lender said Myanmar’s economic expansion will reach 8.5 percent this year, after gross domestic production (GDP) rose to 8.25 percent over the 2013-14 fiscal year that ended in March.
In January, the IMF predicted Myanmar’s economic growth rate would steady at 7.7 percent by March 2015.
IMF Resident Representative in Myanmar, Yu Ching Wong said increases in gas and agricultural production have helped Myanmar build on the country’s economic momentum.
“A low to medium growth average of 7-8 percent is sustainable for a developing country if they can maintain their economic stability and manage macroeconomic policy to control inflationary pressures,” Yu Ching Wong told Myanmar Business Today.
IMF said inflation is expected to remain at 6.5 percent while capital flow from foreign investments and local production continues to increase.
However, the IMF’s Myanmar mission chief, Matt Davies, warned that without proper economic management Myanmar’s favorable economic outlook could be undercut.
“Fiscal and external buffers remain thin and demand-side pressures on inflation and large capital inflows will strain the still-infant macroeconomic management tools,” Davies said.
Close supervision needs to be paid to infrastructure to ensure the country’s modernisation is properly regulated, he added.
He said Myanmar is well placed to build on its recent economic reforms and embark on an extended period of rapid growth, emulating its regional peers.
“Ensuring this growth is sustainable and inclusive requires decisive implementation of a broad range of policies and structural reforms,” Davies said.
After decades of mismanagement under the repressive junta, the new regime headed by President U Thein Sein has introduced nationwide economic and political reforms since coming to power in 2011.
According to the IMF, the fiscal deficit is expected to remain consistent with the government’s five percent of GDP deficit target – in large part due to one-off revenues from telecommunications licences.
Yu Ching Wong said despite fiscal risks, she expects the country’s strong economic outlook to increase international investment interest in the developing nation.
“Developments in the communications, agriculture and mining sector can increase investment confidence and expand the country’s trade opportunities,” Yu Ching Wong said.
With more foreign banks set to enter the country’s economic framework, the rapid economic growth of Myanmar’s financial sector is expected to continue.
Davies said the IMF will work closely with authorities to ensure expansion demands on Myanmar’s macroeconomic policy don’t outweigh the country’s supervision capacity.
“Implementing modernised prudential regulations for all banks as soon as possible will lay the foundation for the development of a sound financial system.”
