The Asian Development Bank (ADB) estimates Myanmar's economic growth at 8.4% this fiscal year and expects a slight fall to 8.3% in 2017

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Rising economic growth and three successive years of falling inflation were among the highlights from the Asian Development Bank’s 2016 predictions for Myanmar as part of its annual economic outlook for Asia.

The ADB estimates Myanmar’s growth rate fell to 7.2 percent in 2015 – hit by the impact of widespread flooding and slower economic growth in China.

Cyclone Komen and intense monsoon rains destroyed one-fifth of Myanmar’s cultivated land last year, displaced 1.6 million people and caused an estimated US$1.5 billion of damage.

Meanwhile, China, which accounts for 36pc of Myanmar’s official international trade, is trying to manage an economic slowdown.

But despite China’s economic issues Myanmar’s economy will manage 8.4pc growth this fiscal year, as the garments and tourism sectors perform well and agriculture rebounds, Peter Brimble, the ADB’s principle country specialist for Myanmar, said.

The ADB expects growth to slow only slightly to 8.3pc in 2017.

The outlook for inflation was also better than expected. The ADB hadprojected inflation for the 2015-16 fiscal year to clear 12pc, based on rising agricultural prices reflected in the consumer price index and a falling kyat.

But in January and February there was a “noticeable drop in monthly inflation figures”, MrBrimble said. The ADB conferred with other international organisations and decided that the increase for the 2015-16 fiscal year was around 11pc.

“So we’re seeing something relatively positive,” he added. “The kyat is quite stable and the price of agricultural products in the consumer price index is going down.”

In fact the ADB now projects three successive years of falling inflation, which it expects to drop to 9.5pc this coming fiscal year and then to 8.5pc in 2017.

“For me it’s one of the hardest things to explain in Myanmar,” said MrBrimble. “Why has it [inflation] been quite so high for quite so long?”

Although inflation is set to fall it remains relatively high, he said. When it comes to measures to help combat rising prices, MrBrimble pointed to the Central Bank.

“We’ve all recognised for a long time that the Central Bank of Myanmar needs to become a stronger player in inflation management,” he said.

That would require the Central Bank to have some kind of institutional autonomy and the tools to finance deficits through bond issuance, soak up money in the economy and have a stronger supervisory role over the banking system to control credit growth, he said.

The current account deficit also remains a problem. It hit 8.9pc of GDP in 2015 as earnings from agricultural and natural gas exports dropped. The ADB expects the deficit to improve to 8.3pc of GDP this year and then 7.7pc in 2017.

Agricultural exports will bounce back, manufacturing exports will continue to grow, and although stronger economic growth will drive up imports, this will be partly countered by lower imported oil prices, the ADB said.

Foreign exchange reserves were another weakness. At the end of 2015 foreign reserves were enough to cover 2.5 months of imports. The ADB estimates reserves should cover four months of imports in order to be able to cushion the country against external shocks, MrBrimble said.

Despite strong growth and lower inflation, the vulnerabilities still called for prudent fiscal policy and bolstering reserves, he said.

Reference: http://www.mmtimes.com/index.php/business/19739-adb-sees-8-4-growth-and-falling-inflation.html