ADB increases Burma’s growth projections
03- Oct- 2012
Burma’s economic growth is expected to increase to 6.3 percent this year and 6.5 per cent in 2013, up from the initial projections of 6 per cent and 6.3 per cent, the Asian Development Bank (ADB) said on Wednesday.
“All-in-all, Myanmar’s economic performance is good and appears to be getting better,” Craig Steffensen, ADB country director for Thailand, said.
The ADB said it was “significantly scaling back” growth forecasts for the region to 6.1 per cent this year and 6.7 per cent in 2013, down from the initial projections of 6.9 per cent and 7.3 per cent.
The bank said that after years of rapid growth, the region must brace for a prolonged period of moderate expansion amidst an ongoing slump in global demand.
Burma is benefiting from investment in oil, natural gas, and power, as well as from growth in tourism, construction, and exports. The investment environment has improved following reforms to unify multiple exchange rates and as industrial countries ease their economic sanctions.
The kyat depreciated against the dollar to about MK870 in August 2012 from MK820 in April, largely the result of relaxed import controls to accommodate a government program to replace old vehicles. The depreciation improved prospects for a recovery in exports of garments, beans, pulses, and other goods that were hurt when the currency appreciated in the previous two years.
Tourist arrivals were particularly strong in the first half of this year, surging by 31 per cent from the year-earlier period. Forecasts for GDP growth in FY2012 (ending 31 March 2013) and FY2013 are edged up from April’s ADO 2012.
The current account deficit this year is projected to be narrower than previously anticipated, reflecting stronger export performance fueled by the weaker kyat and slightly higher receipts from natural gas exports to Thailand. Next year, the current account deficit is expected to widen when import licensing and foreign exchange controls are relaxed.
Forecasts for average inflation in both years are raised slightly from April. Rice prices are expected to increase owing to flooding in August 2012 in the Irrawaddy region and Shan State. Prices of electricity, water supply, and diesel are also likely to rise. Currency depreciation has slightly pushed up retail prices.
Overall, “Developing Asia must adapt to a moderate growth environment, and countries will need to do more to reduce their reliance on exports, rebalance their sources of growth, and increase their productivity and efficiency,” said Changyong Rhee, ADB’s chief economist. “These measures are critical if the region is to continue lifting its people out of poverty.”
In its Asian Development Outlook 2012 Update, ADB projects the region’s gross domestic product (GDP) growth dropping to 6.1 per cent in 2012, and 6.7 per cent in 2013, down significantly from 7.2 per cent in 2011.
The deceleration of the region’s two giants – the People’s Republic of China and India – in tandem with the global slowdown, is tempering earlier optimism.
The report noted that the ongoing sovereign debt crisis in the euro area and looming fiscal cliff in the US could have disastrous spillovers to the rest of the world, particularly developing Asia.
The People’s Republic of China (PRC) is forecast to grow 7.7 per cent this year and 8.1 per cent in 2013, a dramatic drop from the 9.3% posted in 2011. The slowdown in the PRC is having a knock-on effect elsewhere in East Asia, with diminished demand for intraregional exports.
For India, GDP growth will slow to 5.6 per cent in 2012, down from 6.5 per cent in 2011. The downward revision in India’s prospects, due in significant part to weak investment demand, is expected to slow South Asia‘s growth to 5.6 per cent and 6.4 per cent for 2012 and 2013, respectively.
Growth in Southeast Asia is expected to quicken to just over 5% in 2012, mainly due to Thailand’s recovery from severe flooding in 2011. Higher levels of government spending have contributed to growth in Malaysia and the Philippines, while investment and private consumption in the sub-region are generally buoyant with inflationary pressures abating.
The growth forecast remains unchanged for the Pacific region at 6% for 2012, where the resilience of larger Pacific countries, such as Papua New Guinea, is masking the weakening of some smaller economies.
If an extreme shock were to materialize, most economies in the region have room to use fiscal and monetary tools to respond. However, there is currently no region-wide need to pursue aggressive demand management. Rather, efforts should focus on the medium-term issue of continued soft external demand.