While the full economic impact of the July and August 2015 floods on Myanmar’s economy has yet to be assessed, they are expected to reduce production and exports of rice and some other crops.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||-6.8||-6.8||-5.0||-5.0|
Source: ADB estimates.
Severe flooding and landslides in July and August 2015 in Myanmar displaced 1.6 million people, caused almost 120 deaths, and damaged agriculture and infrastructure. The government declared natural disaster zones in Chin and Rakhine states and the regions of Magway and Sagaing. The government also called on international partners to assist with reconstruction and rehabilitation.
The country’s economy as a whole, however, continues to expand at a robust pace on investment stimulated by structural reform and generally strong domestic demand. Fiscal policy and expanded credit are contributing to growth, though both fiscal and monetary policy will likely need to be tightened in the forecast period to dampen inflationary pressures and to stabilize exchange rate expectations.
Inflation accelerated to 8% year on year in May 2015, and disruption to supplies of food and other goods from flooding could add to inflationary pressures.
The Myanmar kyat depreciated against the US dollar by 24%, from MK965 in April 2014 to MK1,275 in early September 2015, largely the result of a widening current account deficit and a stronger US dollar. Gross official reserves remain low at less than 3 months of imports.
Forecasts for Gross Domestic Product growth, inflation, and the current account for the financial year (FY) 2015 (ending 31 March 2016) and FY2016 are retained from the Asian Development Outlook (ADO) 2015, pending data updates and the outcome of national elections scheduled for November 2015.
Risks to price and external stability come from the rapid growth in credit, expansionary budget, and widening trade deficit. A prolonged decline in global prices for natural gas, a major export from Myanmar, would erode its fiscal and external positions.
Excerpted from the Asian Development Outlook 2015 Update.