Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2018 Article IV Consultation with Myanmar







April 12, 2019















On March 15, 2019, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation[1] with Myanmar.

Myanmar’s economy rebounded in 2017/18 but appears to be losing momentum.
Growth rebounded to 6.8 percent in 2017/18 driven by exports and a recovery
in agriculture. The fiscal deficit reached about 2.7 percent of GDP in
2017/18, and central bank financing of the deficit continued to decline.
Headline inflation was moderate in 2017/18 (4.0 percent on average) but has
been rising from increased fuel prices and a depreciating kyat. The current
account deficit widened marginally in 2017/18 to a little under 5 percent
of GDP and was largely financed by strong FDI inflows keeping international
reserves at around three months of imports. Preliminary data in the
transition budget year (April–September 2018) point to deceleration of
growth due to government underspending, waning investor confidence and
moderating global demand.

The medium-term macroeconomic outlook remains favorable. Myanmar’s economy
is expected to gain steam over the medium term albeit at a somewhat slower
pace than previously envisaged and subject to greater downside risks partly
related to the humanitarian crisis in Rakhine state. The fiscal deficit for
the new fiscal year is projected to increase, providing a modest fiscal
stimulus on the back of higher capital spending. A drop in international
oil prices and a gradual moderation in inflation over the near term should
support consumer spending. Successful implementation of the second wave of
reforms in the Myanmar Sustainable Development Plan will help sustain the
growth take off and achieve the Sustainable Development Goals.

Risks are tilted to the downside. A prolonged humanitarian crisis and any
withdrawal of trade preferences could reduce concessional donor financing
and investment leading to lower growth. Macrofinancial spillovers from the
ongoing banking sector restructuring process may be more severe if banks
delay recapitalization. Risks on the global front include trade tensions
and related global financial market volatility, high crude oil prices and
spillovers from exposure to China. On the upside, a faster resolution of
the humanitarian crisis would facilitate higher external financing that
allows greater SDG-related spending and rebuilding of international
reserves.


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Executive Board Assessment[2]

Executive Directors recognized Myanmar’s positive long‑term prospects,
reflecting its growing demographic dividend, competitive labor force, and
strategic location. They noted, however, that economic activity is losing
momentum and near‑term downside risks have increased. They expressed
particular concerns with the potential effects of the prolonged
humanitarian crisis in the Rakhine state and the fragility of the banking
sector. In this context, Directors welcomed the second wave of reforms
embedded in the Myanmar Sustainable Development Plan (MSDP), which focuses
on peace, stability, and good governance. In particular, they stressed the
need to sustain prudent macro‑economic policies and maintain the structural
reform momentum.

Directors agreed that fiscal policy should aim at promoting spending to
achieve the Sustainable Development Goals while phasing out central bank
financing of the fiscal deficit and maintaining debt sustainability. They
welcomed recent declines in central bank financing and efforts to increase
fiscal transparency, which should help reduce risks related to
infrastructure projects including from public‑private partnerships. Given
the low tax‑ratio, Directors stressed the need to improve revenue
mobilization; they also encouraged the authorities to pursue reforms in
public financial management, strengthen budget execution, and enhance
state‑owned economic enterprise efficiency and governance.

Directors supported keeping current monetary conditions tight to anchor
market interest rates and control inflation. They also endorsed further
upgrades in the monetary framework and interest rate liberalization that
would help enhance the transmission mechanism. Directors welcomed recent
reforms, such as the market‑based reference exchange rate, which should
provide a cushion against exogenous shocks.

Directors emphasized the need to swiftly address the systemic risks and
fragilities in the banking sector. They stressed the need to improve
compliance, loss recognition and ensure recapitalization, where needed.
They also affirmed the need to quickly form contingency plans to address
systemic risks in the banking sector and to strengthen the resolution
framework.

Directors noted that capacity development from the Fund will be critical in
supporting the goals of the MSDP. They welcomed the authorities’ progress
on the MSDP thus far such as liberalization of restrictions on foreign
investment but noted that there is room to further improve governance,
including the fiscal transparency of natural resource management, financial
sector regulations and AML/CFT regime, and implementation of the
anti‑corruption framework. Finally, Directors welcomed the recent
improvements in data quality and coverage, and encouraged the authorities
to address remaining data shortcomings.

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It is expected that the next Article IV consultation with Myanmar will be
held on the standard 12‑month cycle.

Myanmar: Selected Economic Indicators, 2015/16–2020/21
1/

2015/16

2016/17

2017/18

2018 (transition)

2018/19

2019/20

2020/21

Act.

Act.

Est.

Proj.

Proj.

Proj.

Proj.

Output and prices

(Percent change)

Real GDP 2/

7.0

5.9

6.8

6.2

6.4

6.6

6.7

CPI (end-period; base year from 2014/15=2012)

8.4

7.0

5.4

8.6

7.2

7.1

6.2

CPI (period average; base year from 2014/15=2012)

10.0

6.8

4.0

7.1

7.5

6.7

6.2

Consolidated public sector 3/

(In percent of GDP)

Total revenue

19.5

18.8

17.1

23.3

17.3

17.4

17.4

Tax revenue

6.1

6.5

6.7

8.4

7.0

7.2

7.4

Social contributions

0.1

0.1

0.1

0.2

0.1

0.1

0.1

Grants

0.4

0.4

0.2

0.3

0.4

0.4

0.4

Other revenue

12.9

11.7

10.0

14.4

9.8

9.7

9.5

Total expenditure

23.9

21.3

19.7

24.8

20.7

21.2

21.5

Expense

15.9

14.8

13.7

18.2

14.5

14.7

14.9

Net acquisition of nonfinancial assets

8.0

6.5

6.0

6.6

6.3

6.5

6.6

Gross operating balance

3.7

4.0

3.3

5.1

2.8

2.6

2.6

Net lending (+)/borrowing (-)

-4.3

-2.5

-2.7

-1.5

-3.5

-3.8

-4.0

Domestic public debt

20.5

20.9

20.9

21.2

21.5

22.5

23.5

Money and credit

(Percent change)

Reserve money

22.8

8.8

6.0

4.6

8.7

6.9

8.7

Broad money

26.3

19.4

18.0

18.6

14.3

13.5

13.7

Domestic credit

31.4

25.5

20.2

21.9

15.2

16.1

15.8

Private sector

34.3

33.8

23.0

21.3

14.0

13.5

13.0

Balance of payments 4/

(In percent of GDP)

Current account balance

-5.2

-4.3

-4.7

-5.9

-4.9

-4.9

-4.8

Trade balance

-5.0

-5.1

-5.4

-6.0

-4.6

-4.5

-4.6

Financial account

-6.5

-7.2

-6.9

-7.3

-5.0

-4.9

-4.8

Foreign direct investment, net 5/

-5.8

-5.2

-5.4

-5.1

-4.2

-3.9

-3.8

Overall balance

-0.6

0.6

0.3

1.3

0.0

0.0

0.0

CBM reserves (gross)

In millions of U.S. dollars

4,762

5,132

5,336

5,462

5,357

5,372

5,341

In months of prospective GNFS imports

3.5

3.4

3.3

3.4

3.2

3.0

2.9

Total external debt (billions of U.S. dollars)

12.7

12.3

17.9

17.9

17.8

17.7

17.7

Total external debt (percent of GDP)

21.2

19.4

26.9

26.8

27.1

24.8

22.6

Exchange rates (kyat/$, end of period)

Official exchange rate

1,220.6

1,360.7

1,336.5

1,551.5

Parallel rate

1,207.8

1,361.1

1,327.2

1,563.6

Memorandum items:

GDP (billions of kyats)

72,714

79,721

90,451

33,557

104,393

119,004

135,845

GDP (billions of US$)

59.7

63.2

66.7

23.7

65.7

71.4

78.1

GDP per capita (US$)

1,151

1,210

1,267

1,254

1,242

1,321

1,440

Sources: Data provided by the Myanmar authorities; and
IMF staff estimates and projections.

1/ The fiscal year is from April 1 to March 31, up to
2017/18. From 2018/19 onwards, the fiscal year is from
October 1 to September 30.

2/ Real GDP series is rebased to 2010/11 prices by the
authorities.

3/ Union and state/region governments and state
economic enterprises. Revised to reflect Government
Finance Statistics Manual 2014 classification.

4/ The balance of payments data has been revised
according to the BPM6 methodology.

5/ FDI from 2017/18 onwards reflects improved forex
transaction data collection, which has caused a break
in the data series.

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[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
here:

http://www.imf.org/external/np/sec/misc/qualifiers.htm


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Ting Yan

Phone: +1 202 623-7100Email: MEDIA@IMF.org