Myanmar’s economy may grow 6.75 percent this fiscal year, led by natural gas sales and investment as the country moves to modernize its financial system, according to the International Monetary Fund.
Gross domestic product in the year ended March 31 expanded an estimated 6.5 percent, the IMF said in a statement today. Inflation in the fiscal year that began April 1 should be about 5.5 percent, while international reserves will rise as foreign investment offsets a wider current-account deficit, it said.
“The authorities’ ambitious reform program is bearing fruit, with macroeconomic stability and high investor interest,” Matt Davies, the IMF’s mission chief for Myanmar, said in a statement after a 15-day visit to the country ending today. “Budget policy has managed to balance the twin goals of addressing Myanmar’s large development needs and maintaining macroeconomic stability.”
President Thein Sein’s moves to allow more political freedom and open Myanmar’s economy following about five decades of military rule have attracted companies including Ford Motor Co. and Coca-Cola Co. He sought the end of U.S. sanctions in a meeting this week with President Barack Obama in Washington, a month after the European Union lifted punitive measures.
Myanmar has made “great strides” in liberalizing its exchange rate, which is now closely aligned to informal markets, Davies said. The kyat has depreciated 13 percent since the managed float in April 2012 to 928 per dollar, according to data compiled by Bloomberg.
Macroeconomic management remains a key risk to Myanmar’s economic outlook, Davies said, adding that a new law would give the Central Bank of Myanmar autonomy to handle inflation pressure from wage increases, money growth and real estate prices. He called for more supervision of a banking sector that is “growing and modernizing rapidly.”
Myanmar should seek to attract investment by improving infrastructure and streamlining bureaucracy rather than offering tax incentives, Davies said. The budget deficit this fiscal year is expected at about 5 percent of GDP with more increases in health and education spending, he said.
“Sustained increases in tax revenues are crucial to boost expenditure and reduce dependence on natural resources,” Davies said. “This requires broadening the tax base and improving compliance.”