Myanmar needs broad reforms to maintain its rapid growth rate: IMF
June 19, 2014, 12:00 am TWN
WASHINGTON--The International Monetary Fund said Myanmar's economy is expected to build on already rapid growth but that momentum was at risk unless broad reforms are undertaken.
An IMF team met with authorities during a June 4-17 visit to Myanmar as part of the Fund's typically annual review of a country's economy, known as Article IV consultations.
“Myanmar is well placed to build on its recent economic reforms and embark on an extended period of rapid growth, emulating its regional peers,” said Matt Davies, who headed the team, in a statement.
“However, ensuring that this growth is sustainable and inclusive requires decisive implementation of a broad range of policy and structural reforms.”
The IMF predicted Myanmar's economy was poised for even slightly stronger growth of 8.5 percent in the current fiscal year ending March 2015 than in the prior year, when gross domestic product (GDP) grew 8.25 percent, due to rising gas production and investment.
Inflation was likely to remain contained, around an annual rate of 6.5 percent this year, while money and credit flowing to economy would continue to expand at double-digit rates, the Washington-based Fund said.
But the IMF saw significant risks to the outlook for the country which was left impoverished after decades of economic mismanagement under the former junta, as well as years of sanctions by the West imposed in protest at the government's dire human rights record.
The quasi-civilian regime that came into power in 2011, headed by President Thein Sein, has ushered in a broad spectrum of changes, but the IMF said more was needed.
Large capital inflows will strain the country's “still-infant” macroeconomic management tools, it said.
With the expected rush of foreign banks into the already rapidly growing financial sector, supervision capacity will be stretched.
Although the 2014/2015 fiscal deficit is expected to remain within the authorities target of five percent of GDP, that was due in part to large one-off revenues from telecommunications licenses.
Keeping the deficit ratio below that target, while also expanding development spending, requires increased tax revenues, the IMF said.
“This relies on policy reforms that create a system that is easy to comply with and enforce, with minimal exemptions.”
While modernization of the financial sector was making progress, the regulatory system and supervision need improvement, particularly because of the expected entry of foreign banks, the Fund said.