Regions and Countries

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p. 22 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

Myanmar

Economic performance

Economic growth: Myanmar's growth rates have improved in recent years. According to official data, GDP grew by 5.8 percent in FY1998 (ending 31 March 1998), and is reported to have risen by 10.9 percent in FY1999 primarily because of favorable weather and an increase in land area under cultivation. However, Myanmar still faces structural problems that prevent the economy from achieving a higher level of socioeconomic development. These include a continuous fiscal deficit, inefficient management of state economic enterprises (SEEs), weak external performance, and a dual exchange rate system.

Employment: Official data indicate that in FY1997, the labor force consisted of about 22.5 million, 14.2 million of whom were employed, implying an unemployment rate of 4.1 percent. The agriculture sector is the largest employer, accounting for 56.5 percent of the labor force. This is followed by trade, hotels and restaurants, and manufacturing.

Inflation: The inflation rate rose to around 30–50 percent in FY1997 and FY1998 because of the Asian financial crisis, as well as budget deficits and expansionary monetary policy. However, the inflation rate dropped to about 11 percent in FY1999, and is estimated to have fallen throughout FY2000, largely because of the increase in agricultural production and the introduction of treasury bills and bonds as a means for financing the fiscal deficit.

Fiscal balance: Government revenues as a percentage of GDP declined from 7.2 percent in FY1998 to 4.9 percent in FY1999 because of a slow increase in tax receipts. Expenditures as a percentage of GDP declined from 6.9 percent in FY1998 to 5.8 percent in FY1999, with the GDP ratio of capital expenditures declining faster than that of current expenditures. The government budget registered a substantial deficit of kyats (MK)20.2 billion in FY1999. The SEEs’ deficit almost doubled from MK47.5 billion in FY1997 to MK85.9 billion in FY1998, but declined to MK71.4 billion in FY1999. Combining the government and SEE deficits, the consolidated budget deficit for FY1999 amounted to MK110.5 billion or 5.0 percent of GDP.

External sector: Despite restrictions on imports, weak export performance has kept the trade deficit high. With a reduction in imports, and a surplus in the services and transfers accounts, the current account deficit has been decreasing. Foreign reserves continued to be inadequate, covering only about 1.6 months of imports.

Domestic policies: The most critical policy issue continued to be the dual exchange rate system. The foreign exchange value of domestic currency has fallen sharply since the second half of 1998, making it more difficult for the country to reform the exchange rate system. The second most important policy issue is the recurrent large fiscal deficit resulting from a small tax base. Despite a significant reduction in government expenditures, the nonfinancial public sector deficit remains high. This used to be financed by the central bank credit, which contributed to inflationary pressure; however, treasury bills and bonds are now increasingly used to finance the public sector deficit.

ADB operations

Operational strategy: ADB continued to monitor economic developments in Myanmar. An operational strategy will be formulated when appropriate.

Loans and technical assistance: No loans have been provided to Myanmar since 1986 and no technical assistance since 1987.

Project implementation: All 32 loans, which were approved before 1986, were closed by the end of 1998. However, Myanmar is involved in ADB’s regional cooperation initiative for the Greater Mekong Subregion, participating in regional meetings and workshops supported by ADB’s regional technical assistance.

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