The International Monetary Fund says Myanmar’s economic outlook is favourable but has expressed concern about inflation.
“Inflation is expected to exceed six percent by the end of FY2013/14 and remain elevated in FY2014/15,” the head of the IMF mission to Myanmar, Mr Matt Davies, said in a statement issued on January 21.
Mr Davies also expressed concern about the external current account deficit, saying it was expected to widen further to about five percent of gross domestic product during the same period.
“As a result, the government’s accumulation of international reserves during FY2013/14 was slower than projected,” he said.
“Overall reserves still remain above three months of imports and accumulation should pick up in FY2014/15 as foreign direct investment and other inflows outweigh the current account deficit.”
Mr Davies said risks to the economic outlook are due mainly to limited macroeconomic management capacity and “narrow cushions”.
He said as well as inflation remaining elevated, there were pressures from rapid money and credit growth, kyat depreciation and possible electricity price shocks.
“International reserves are still low and vulnerable to shocks,” the statement said.
On financial sector modernization, Mr Davies said the process would require sustained reform efforts over several years.
“The banking sector is growing and modernizing rapidly and will require updated regulations and improved supervision capacity,” he said.
“Foreign bank participation can play a useful role in accelerating financial sector development but a gradual process is needed to minimize risks and limit additional strain on supervisory resources.
“Supervisors also need to focus on the new policy banks established by government to ensure they are managed soundly and to minimize fiscal risks.”
Mr Davies released the statement at the end of a 12-day visit with an IMF team for the second and final review of a staff-monitored program for 2013.
The program is an informal dialogue process between IMF staff and a member country on its economic policies.
During its visit the IMF team met Central Bank of Myanmar Governor U Kyaw Kyaw Maung, Finance Minister U Win Shein, other senior officials and representatives of the private sector and donors.
