The International Monetary Fund and World Bank have both cut GDP growth estimates for 2018-19 and warned of increasing risks to the economy, in part due to the Rakhine crisis.
The IMF said in a statement on Thursday that it expected growth of around 6.4 percent in 2018-19, down from 6.8 percent in 2017-18, while the same day the World Bank said it expected the economy to expand 6.2 percent in 2018-19.
The forecasts for 2018-19 were below previous estimates, with the IMF saying in March it expected growth of 7.0 percent in 2018-19 and the World Bank anticipating expansion of 6.8 percent.
A less favourable global economic environment combined with declining investment, rising cost pressures and slowing consumption have all contributed to the slowdown.
Both the IMF and World Bank expect growth to recover over the medium term to nearly 7 percent, but have also urged the government to expand its economic reform agenda and increase investments in infrastructure, health and education.
“The implementation of a second wave of reforms with greater investments, in both physical and human capital, financed by higher revenues and improved spending efficiency should sustain Myanmar’s growth take-off,” said Mr Shanaka J Peiris, who led an IMF team that visited Myanmar from November 28 to December 13 for annual article IV consultations.
“Risks to the outlook are tilted to the downside. A prolonged crisis in Rakhine State and a withdrawal of trade preferences could reduce concessional donor financing and investment, leading to lower growth and significant job losses,” Peiris said.
In its biannual Myanmar Economic Monitor released on Thursday, the World Bank noted that macroeconomic volatility has also increased, with inflation hitting a two-year high in August and the kyat depreciating by 18 percent against the US dollar since April.
One factor in the slowing economy was government under-spending, with a significant proportion of the budget – particularly allocations for capital projects – going unused. While parliament approved a deficit equivalent to 5.8 percent of GDP in 2017-18, the actual deficit was just 2.7 percent of GDP, while the approved deficit of 6.0 percent for 2018-19 is likely to come in at around 4.0 percent, the World Bank said.
Increased government spending in the lead up to the 2020 election is likely to be a driver of growth in the medium term, it added.
Both the IMF and World Bank said recent government initiatives such as the release of the Myanmar Sustainable Development Plan, the developed of a project bank and negotiations with China over Belt and Road Initiative investments should also encourage medium-term growth.