Trade deficit to rise but inflation the concern

The trade deficit will reach K4 trillion (US$3.9 billion) by the end of next financial year, says Minister for National Planning and Economic Development U Kan Zaw.

Inflation is also pegged to average 6.83 percent in 2015-16 compared year-on-year, though could rise as high as 8.11pc by March 2016, he added.

U Kan Zaw revealed the figures while laying out the government’s 2015-16 financial forecast at a session of the new hluttaw.

The K4 trillion trade deficit will be the result of exports in 2015-16 reaching K13.15 trillion and imports of K17.34 trillion, he said.

The trade deficit is higher than an earlier projection made by the International Monetary Fund. In October 2014 it said the 2015-16 trade deficit was projected to be K3.2 trillion, though the current accounts deficit – a measure which covers trade flows, as well as international transactions in other areas like services and income – was projected to be K3.77 trillion.

While the trade deficit appears headed for an increase, parliamentarians said they were most concerned by the possibility of inflation.

Amyotha Hluttaw representative U Phone Myint Aung said he is watching estimates that inflation could reach 8.11 percent by March 2016 compared year-on-year may be too high, adding it was near recent inflation highs.

U Kan Zaw minister said he admitted increased government spending may put add inflationary pressure, but added it was necessary to tackle several priority areas. He highlighted low-price and affordable housing, increasing downtown office space and highway improvement, as well as a salary increase for about 500,000 civilian and military staff in government service, as earmarked for increased expenditure.

The business community has also been keenly watching the possibility of inflation.

U Khin Maung Lwin, a businessperson from Nay Pyi Taw’s Pyinmana township, said, “People are worried about rising prices,” adding that a proposed minimum wage could be a headache for small and medium-sized businesses.

Others are concerned that other reforms could further increase the cost of doing business.

U Ko Oo, who runs a roasted beans enterprise, said, “If a minimum wage is brought in at the same time as civil service salaries are raised, small enterprises like mine will have a big headache. We can’t raise prices unless we make more profit.”

Average inflation rate based on consumer prices was 2.82pc in 2011-2012, 2.85pc in 2012-2013 and 5.67pc in 2013-2014, according to government statistics. As of last March it had reached 5.7pc, Pyidaungsu Hluttaw Public Accounts Joint Committee reported last August, at a time when the exchange rate against the US dollar was K964.

The International Monetary Fund said in October 2014 that inflation is likely to remain under control at about 6pc for the medium term, though noted it could become a risk.

U Kan Zaw’s estimates for 2015-16
Trade deficit: K4 trillion
Exports: K13.15 trillion
Imports: K17.34 trillion
Inflation (year-on-year): 6.83pc
Inflation high (in March 2016): 8.11pc

2016FY projects by the IFC, made in October 2014
Trade deficit: K3.2 trillion
Current account deficit: K3.77 trillion
Exports: K16.66 trillion
Imports: K19.86 trillion
Inflation: 6.3pc

2015FY projects by the IFC, made in October 2014
Trade deficit: K2.47 trillion
Current accounts deficit: K3.47 trillion
Inflation: 6.6pc


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