Myanmar will grow steadily in the short to medium term, with a projected 6.8 percent growth in the 2013-2014 year, said the World Bank, applauding the Southeast Asian nation’s progress in making political and economic reforms.
There are, however, still risks both internal and external. Inflation is particularly worrisome and could hurt the poor as income disparity grows alongside with the economy.
The World Bank released the first edition of its Myanmar Economic Monitor on Wednesday and applauded Myanmar on its strong 6.5 percent growth in the year ending March 2013. The bank expects growth to reach 6.8 percent in the current year and 6.9 percent in the medium term, driven by continued strong performance in gas production, trade and agriculture, as well as record foreign direct investment. The report will be released every six months as the bank tracks Myanmar’s progress closely.
“It’s not just a historical trend,” Khwima Nthara, the World Bank’s senior economist in Myanmar, told Reuters, referring to the growth forecast, which outpaces the average annual expansion of 5.1 percent expected for Southeast Asia this year and the next. “This is very much attributable to the new wave of reforms.”
Foreign investment contributed in large part to the strong growth and optimistic outlook for the economy. FDI rose to $2.7 billion in 2012-2013, up from the $1.9 billion in 2011-2012, with energy, garment, information technology, and food and beverages sectors receiving most of that investment. The government passed a new foreign investment law that is expected to continually help improve the foreign investment environment.
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To maintain growth, Myanmar will need to coninue making domestic reforms. Externally, risk factors include the possibility of a slowdown in Chinese investment and a decline in global commodity prices.
"Thus far, Thein Sein’s liberalization agenda has been met with relatively little resistance," said Christian Lewis, a Southeast Asia specialist for the Eurasia Group, a political and economic risk consultancy, in an email to International Business Times. "But as specific plans to open domestic industries to international businesses crystallize and competitors flood into different sectors, the administration may face more difficulty achieving reforms at the bureaucratic level."
"A good example is telecommunications, in which two large state-owned enterprises are being asked to undergo rapid and radical transformation to become vialble private companies," Lewis added. "However, at the executive level there may be concerns about the equitization process, or at a bureaucratic level simply the lack of capacity to implement many of the changes that would allow these companies to survive on their own."
Inflation reached 7.3 percent in August, fueled by higher costs for housing and food, particularly rice, as exports for the grain staple grew and less is available for domestic consumption, the World Bank said. Inflation needs to be kept under control or the majority of the population could suffer.
“Rising inflation is always a cause for concern since it hurts the poor disproportionately, but economies do sometimes experience rising inflation, especially when in transition, as is the case in Myanmar,” said May Thet Zin, the bank’s economist for Myanmar, according to Mizzima, a Burmese news outlet.
As much as 99 percent of the nation’s 60 million population still live in poverty, and growing pains as the economy expands, while necessary, could make life harder than it already is for the poor, said Maung Maung Soe, a retired professor from the Yangon University of Economics, at an economic forum organised by the May Kha Foundation on Sunday, highlighting the unequal income and property distribution in Myanmar.
“Many don’t even have a place to live. Almost all the land is in possession of the extremely wealthy,” Maung Maung Soe added.