Press Release: IMF Executive Board Concludes 2013 Article IV Consultation with Myanmar
IMF News, August 2, 2013
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- Published: August 2, 2013
Recent economic developments
- Growth is estimated to have risen to 6½ percent in fiscal year 2012/13 (April-May), driven by gas production, construction and services.
- Inflation climbed to 4.7 percent in March 2013.
- The external current account deficit is estimated to have widened to around 4½ percent of GDP in 2012/13, largely financed by foreign direct investment.
- Recent depreciation of the kyat is contributing to aligning the exchange rate with longer-term fundamentals after some apparent overvaluation during 2012.
- The auction-determined reference exchange rate (used by the central bank) and the informal rate have converged.
- International reserves increased to US$4.6 billion at end-March, covering 3¾ months of prospective imports.
- Broad money and private sector credit are growing rapidly.
- The fiscal deficit in 2012/13 is estimated to have declined to 3¾ percent of GDP, on account of higher tax revenues.
Policy reforms and IMF-supported program
- The government has pursued wide-ranging economic reforms, including under their Staff-Monitored Program with the IMF, which is on track.
- Central elements of the policy program:
- Adoption of a managed floating exchange regime.
- Establishment of a functioning formal foreign exchange market.
- Liberalization of imports and removal of exchange restrictions.
- Steps to liberalize bank lending.
- Budget allocations for health and education increased substantially in 2012/13.
- Reforms underway to tax policy and tax administration.
- Legislation passed to improve the business climate and boost investment.
Economic outlook and risks
- Short-term outlook:
- Growth is expected to accelerate slightly in 2013/14, led by rising gas production and investment (including in transport and telecommunications), and a recovery in agriculture.
- Pressures from wage increases and asset prices are building, but inflation is expected to remain contained at around 6½ percent (year-on-year), assisted by global commodity prices which are forecast to decline.
- International reserves are projected to continue to rise.
- Financial intermediation is forecast to increase further, with broad money and credit to the economy continuing to expand at double-digit rates.
- Following a mid-year supplementary allocation, the budget deficit is projected at around 5 percent of GDP.
- Medium-term outlook:
- Sustained and inclusive growth of around 7 percent is achievable, provided institutions and policies to manage the economy and supervise the financial system continue to be built.
- Policies supportive of private sector investment, and public spending on infrastructure, health, and education are required.
- Key risk:
- Limited macroeconomic management capacity, strained by the rapid, broad-based economic transition and emerging domestic price pressures.
Executive Board assessment and policy recommendations
- Commendations:
- Directors commended impressive progress in liberalizing the economy and advancement toward medium-term macroeconomic stability and institutional development.
- Overarching guidance:
- Proceed with needed reforms in a carefully sequenced manner and at a pace consistent with administrative capabilities.
- Fiscal policy:
- Fiscal policy appropriately balances macroeconomic stability with development objectives.
- Support for reorienting expenditures toward health, education, and infrastructure, taking account of implementation and absorptive capacity.
- Need to maintain debt sustainability following recent rescheduling of external arrears.
- Encourage reducing monetization of the fiscal deficit further.
- Develop a medium-term fiscal framework aimed at smoothing expenditure and building fiscal buffers, requiring improved public financial management and a well-administered broad-based tax system to mobilize non-resource revenues.
- Exchange rate and reserves:
- Welcome liberalization of the foreign exchange system and adoption of a managed float, which facilitated convergence of formal and informal exchange rates.
- Recent depreciation of the kyat has helped align the exchange rate with longer-term fundamentals.
- Encourage further build-up of the central bank’s international reserves to more comfortable levels.
- Look forward to full liberalization of current account transactions envisaged for this year.
- Monetary policy and central bank:
- Urgency of improving monetary policy tools.
- Key priorities: enactment of a new central bank law to establish an autonomous and credible monetary authority; development of instruments for effective monetary operations.
- Welcome resumption of regular deposit auctions and removal of financing constraints on open market operations.
- Financial sector development:
- Encourage sustained efforts to develop a modern financial sector to support growth and the transmission of monetary policy.
- Emphasize strengthening supervision (including of foreign exchange operations and state banks), enhancing prudential regulations and regulatory capacity, and improving licensing procedures for banks.
- Urge authorities to address remaining deficiencies in the regime against money laundering and the financing of terrorism.
- Technical assistance and capacity building:
- Recognize the importance of intensive technical assistance that is demand-led and tailored to Myanmar’s specific needs.
- Prioritization and close coordination with development partners are needed given the breadth of the reform agenda and limited implementation capacity.
- Particular priority should be given to improving economic statistics.
Selected economic indicators and key statistics
- GDP (2012/13): US$55.3 billion
- Population (2010/11): 61.2 million
- Quota: SDR 258.4 million
- Output and prices (Percent change)
- Real GDP (authorities): 2009/10: 10.6; 2010/11: 10.4; 2011/12: 5.9; 2012/13: 6.7; 2013/14: …
- Real GDP (staff working estimates): 2009/10: 5.1; 2010/11: 5.3; 2011/12: 6.4; 2012/13: 6.8
- CPI (end-period): 2009/10: 7.7; 2010/11: 8.9; 2011/12: -1.1; 2012/13: 4.7; 2013/14: 6.5
- CPI (period average): 2009/10: 2.2; 2010/11: 8.2; 2011/12: 2.8; 2012/13: 5.6
- Consolidated Public Sector (Percent of GDP)
- Total revenue: 2009/10: 10.7; 2010/11: 11.4; 2011/12: 12.0; 2012/13: 23.0; 2013/14: 23.4
- Union government: 2009/10: 5.8; 2010/11: 6.3; 2011/12: 9.1; 2012/13: 9.0
- o/w: Transfers from SEEs to Union government: 2009/10: 2.3; 2010/11: 2.0; 2011/12: 1.9; 2012/13: 1.8
- SEE receipt: 2009/10: 7.2; 2010/11: 7.0; 2011/12: 7.8; 2012/13: 15.8; 2013/14: 16.0
- Total expenditure: 2009/10: 15.6; 2010/11: 16.9; 2011/12: 16.6; 2012/13: 26.6; 2013/14: 28.4
- Expense: 2009/10: 8.7; 2010/11: 8.8; 2011/12: 9.8; 2012/13: 16.7; 2013/14: 19.6
- Net lending (+)/borrowing (-): 2009/10: -4.9; 2010/11: -5.4; 2011/12: -4.6; 2012/13: -3.7; 2013/14: -5.0
- Domestic public debt: 2009/10: 18.7; 2010/11: 21.0; 2011/12: 22.5; 2012/13: 22.6; 2013/14: 22.4
- Money and Credit
- Broad money: 2009/10: 34.8; 2010/11: 36.3; 2011/12: 26.3; 2012/13: 69.9; 2013/14: 26.2
- Domestic credit: 2009/10: 34.4; 2010/11: 25.1; 2011/12: 6.2; 2012/13: 29.2
- Private sector: 2009/10: 36.9; 2010/11: 65.4; 2011/12: 60.1; 2012/13: 49.9; 2013/14: 36.8
- Balance of Payments (Percent of GDP, unless otherwise indicated)
- Current account balance: 2009/10: -1.3; 2010/11: -1.9; 2011/12: -2.4; 2012/13: -4.4; 2013/14: -4.3
- Trade balance: 2009/10: 1.3; 2010/11: 0.9; 2011/12: -0.7; 2012/13: -3.9; 2013/14: -3.0
- Exports: 2009/10: 19.9; 2010/11: 17.4; 2011/12: 17.9; 2012/13: 18.6
- Imports: 2009/10: -18.6; 2010/11: -16.5; 2011/12: -22.5; 2012/13: -22.8
- Financial account: 2009/10: 4.0; 2010/11: 3.6; 2011/12: 5.7
- Foreign direct investment, net: 2009/10: 2.5; 2010/11: 4.5; 2011/12: 3.7; 2012/13: 5.2
- Overall balance: 2009/10: 0.8; 2010/11: -1.0; 2011/12: 1.6
- Gross official reserves
- In millions of U.S. dollars: 2009/10: 2,809; 2010/11: 3,754; 2011/12: 4,026; 2012/13: 4,599; 2013/14: 5,537
- In months of total imports: 2009/10: 3.9; 2010/11: 3.5
- External debt
- Total external debt (billions of U.S. dollars): 2009/10: 13.8; 2010/11: 14.4; 2011/12: 15.3; 2012/13: 13.7; 2013/14: 11.7
- (In percent of GDP): 2009/10: 36.1; 2010/11: 29.0; 2011/12: 27.3; 2012/13: 24.8; 2013/14: 19.7
- of which: External debt arrears (billions of U.S. dollars) 3/: 2009/10: 9.3; 2010/11: 9.9; 2011/12: 10.8; 2012/13: 4.8
- Terms of trade (in percent change): 2009/10: -2.9; 2010/11: -2.7; 2011/12: -0.1; 2012/13: 0.3
- Exchange rates (kyat/$, end of period)
- Official exchange rate: 2009/10: 5.4; 2010/11: 880
- Parallel rate: 2009/10: 1004; 2010/11: 861; 2011/12: 822; 2012/13: 878
- Memorandum items
- GDP (billions of kyats) 4/: 2009/10: 34,958; 2010/11: 39,847; 2011/12: 43,368; 2012/13: 47,433; 2013/14: 53,501
- GDP (billions of US$): 2009/10: 38.1; 2010/11: 49.6; 2011/12: 56.2; 2012/13: 55.3; 2013/14: 59.4
- GDP per capita (US$): 2009/10: 587; 2010/11: 742; 2011/12: 900; 2012/13: 868; 2013/14: 915
Source: Press Release No. 13/287, August 2, 2013, IMF Communications Department.