IMF forecasts strong growth despite signs of overheating

Myanmar’s economy is poised for strong growth this year, despite signs of overheating, the International Monetary Fund said last week.

“The economy is expected to grow by 8.5 percent, reflecting strong growth momentum and expansionary macroeconomic policies,” the Washington-based IMF said in a news release issued on September 18.

It said a projected increase in the fiscal deficit in the budget for the 2015-16 financial year would provide an expansionary stimulus and contribute to strong credit growth and a rising current account deficit.

Central Bank of Myanmar financing of the deficit was likely to remain significant and credit growth was expected to accelerate, the IMF said.

“As a result, inflation is expected to rise further in FY 2015-16 and the current account deficit to widen,” it said.

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The IMF raised concern about increased risks to growth and stability, which had been amplified by recent floods.

It said lower natural gas prices would further reduce export earnings and government revenue, and a sharper than expected slowdown in China’s growth would have a negative effect on trade.

“Moreover, a tightening of monetary policy in the United States could strengthen the US dollar and put renewed downward pressure on the kyat,” it warned.

An assessment by the IMF’s directors noted the signs of economic overheating and the impact of the floods on the economy and urged the authorities to strike a balance between the need to support economic recovery and reconstruction and the imperative to maintain macroeconomic stability.

The assessment urged taxation collection reforms to generate more government revenue and also stressed that a structural reform agenda was essential to achieve inclusive and sustainable growth.

The IMF said real GDP growth for the fiscal year ending March 31 was estimated to have reached 8.5 percent.

It said inflation rose to 8 percent in the year to May, up from 4 percent in October 2014, and mainly reflected strong domestic demand.

The fiscal deficit increased to 3 percent of GDP in 2014-2015 and credit to the private sector continued to grow strongly, to 35 percent in the year to March, but was down on 2013-2014.

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