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Myanmar on track for economic growth, says ADB

The Asian Development Bank (ADB) has released its report on economic outlook of the region, including Myanmar, for this year.

The Asian Development Outlook 2019 Update report, released on Wednesday in Manila, provides analysis of macroeconomic issues in developing Asia, including new growth forecasts by country and region for 2019 and for 2020.

In the report, the bank said Southeast Asia is being hit by the persistent trade friction between the China and the US, slowing world trade, and weakening global growth. The sub regional GDP growth forecast is downgraded by 0.4

percentage points for this year and by 0.3 points for next year. With softer growth comes lower inflation but, as imports slow along with exports, there is little revision to an earlier forecast for a slightly narrower regional current account surplus.

GDP growth forecasts are downgraded from April for five (Indonesia, Laos, the Philippines, Singapore, and Thailand) of the 10 economies in the sub region and unchanged for the other half, with Brunei, Cambodia, Malaysia, Myanmar, and Viet Nam on track to meet forecasts.

Myanmar’s GDP growth forecast in April for this year was 6.6 percent and is unchanged in the update. The country’s GDP growth forecasts for 2020, at 6.8pc, also remains unchanged.

Inflation forecasts for this year are unchanged for Indonesia, Singapore, and Thailand but raised for Laos and Myanmar largely because of unexpected pressure on domestic food prices arising from lower domestic food production and logistical problems affecting inland food shipments.

Myanmar’s inflation forecast in April for 2019 had been 6.8 percent but the update raises it to 8pc. The inflation forecast for Myanmar in 2020 remains unchanged at 7.5pc.

Myanmar’s inflation figures of 8pc for this year and 7.5pc for 2020 are the highest in Southeast Asia, according to the report.

Projections for current account deficits this year are narrower for Myanmar, Laos, and the Philippines, wider for Cambodia and unchanged for Indonesia.

The report said that trends in the first half of fiscal year 2019 (FY2019, ending September 30) suggest that Myanmar’s economic growth will likely align with the forecasts. Inflation is now seen to be higher than expected in April, and the current account deficit narrower than expected. GDP growth in the first half of FY2019 was likely strong, though official GDP data is not yet available for these months.

Trends in export earnings, international tourist arrivals, and foreign direct investment (FDI) inflows support an estimate of growth at 6.6 percent year on year. Despite a slowdown in the global economy and in China, merchandise exports rose by 7.7pc in US dollar terms in the first 10 months of FY2019, while imports contracted by 5.9pc. The contraction in imports reflected mainly the government’s tighter screening of imports of luxury goods in 2018. Myanmar thus posted a small trade surplus of US$54.6 million in the period.

Meanwhile, international tourist arrivals and FDI inflows accelerated. While western investors shunned Myanmar because of concerns over continued unrest in some conflict-affected areas, higher investment flowed from Asian investors, in particular from Hong Kong, China, and Singapore. These foreign investments seem to have gone largely into transport, communications, and manufacturing.

GDP growth should therefore meet forecasts for both this year and next, as prospects for exports, international tourist arrivals, and FDI look positive in the near term.

New orders were particularly strong for construction and other goods related to infrastructure development.

With the country posting a trade surplus, the current account deficit likely narrowed in the first nine months of FY2019. In addition, strengthening inbound tourism pushed up net service exports to make a significant contribution to the narrowing of current account deficit. Forecasts for a widening current account deficit are now reined in by half a percentage point of GDP for 2019 and 2020.

Source: Myanmar Times

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