Population 63.672 million
GDP 54.049 US$ billion
@rating
country
Business climate
assessment
| 2010/11* | 2011/12 | 2012/13(e) | 2013/14(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
5.3 |
5.5 |
6 |
6.3 |
|
Inflation (yearly average) (%)
|
8.2 |
4.2 |
5.8 |
6.5 |
|
Budget balance (% GDP)
|
-6 |
-5.5 |
-4.6 |
-4.3 |
|
Current account balance (% GDP)
|
-0.8 |
-2.7 |
-4.4 |
-3.1 |
|
Public debt (% GDP)
|
47.6 |
48.7 |
49.5 |
48 |
| (e) Estimate (f) Forecast * fiscal year: from April to March |
||||
STRENGTHS
- Abundant raw materials (rice, teak, minerals, gas, oil)
- Considerable hydroelectric potential
- Proximity of dynamic economies (India, China, Thailand)
- High tourism potential
WEAKNESSES
- High risk of ethnic tensions
- Continuation of economic sanctions
- Self-sustaining and poorly diversified economy
- Lack of structural reform (investment in infrastructures, health and education)
Risk assessment
Growth driven by investments
Growth is expected to increase slightly in 2013, driven by FDI in energy, oil prospecting and infrastructures. These sectors will benefit from the partial lifting of economic and political sanctions by western countries and also from the adoption of new legislation in November 2012, aimed at promoting foreign investment (tax exemptions, guarantees against the nationalisation risk, etc.). Moreover, they will be buoyed by the unification of the exchange rate by the authorities. The country – which had two exchange rates – became a country with a single exchange rate in April 2012 (a managed floating exchange rate including a +/- 2% fluctuation range). The exchange rate unification will make it possible to eliminate market distortions, thus favouring FDI inflows.
On the other hand, consumption growth is expected to remain stable (around 4%) and unlikely to contribute significantly to growth because of the large proportion of the population living below the poverty threshold and a relatively high inflation level. Inflation will reach 6.5% in 2013/14 mainly because of the Central Bank’s inability to control the money supply growth.
Declining fiscal and current account deficits
Prudent management brought the fiscal deficit down in 2012. The unification of the exchange rate is expected to further reduce the deficit in 2013. The exchange rate depreciation following the unification should improve the country’s price competitiveness, increase the export revenues of state enterprises and thus fiscal revenues. Moreover, the authorities plan to cut military spending to 15% of total spending (against 24% previously)
The current account deficit is expected to fall in 2013 in line with the improved trade balance (-1,3% against -3,3% in 2012). The growth in good imports necessary for the investment projects will be more than offset by higher revenues from natural gas sales as a result of the start of operations in new fields. Myanmar’s external debt is characterised by substantial payment arrears vis-à-vis multilateral (80%) and bilateral and private (20%) creditors. FDI inflows, however, cover almost the entirety of the economy’s external financing needs, making it possible for the Central Bank to build up abundant foreign exchange reserves, which remain at a comfortable level with regard to imports (10 months of imports in 2013).
Towards political openness
The country is undergoing an unprecedented political liberalisation process. The November 2010 parliamentary elections, which put an end to the exercise of power by the military junta, and President Thein Sein’s arrival have opened the way to reforms since the summer of 2011. Partial legislative elections were held in April 2012, the first in which the opposition participated as a whole since those of 1990. The National League for Democracy (LND) won 43 of the 45 seats at stake, enabling Aung San Su Kyi, leader of the LND, to become a member of the Parliament. However, the junta continues to dominate political life (94% of the seats) and could curb the democratic process if there were any fear of defeat in the next legislative elections. Recent positive developments have made it possible for discussions to be begun again with western countries. At the start of 2012 The EU and the United States decided to partially lift the restrictions on financial aid. Moreover, President Barack Obama made an official visit to Rangoon in November 2012. This visit was the opportunity to lift the American prohibition on imports of Burmese products. Furthermore, military cooperation seems to be beginning between the two countries. The Pentagon is inviting the country to join the “Cobra-Gold” military exercise, which currently unites the United State and Thailand.
However, Naypyidaw’s relations with western countries could be affected by the government’s wait-and-see policy with regard to the interethnic violence, which has brought the Buddhist and Islamic communities into conflict in the Rakhine state since June 2012.
