IMF Staff Completes 2019 Article IV Visit to Myanmar
IMF News, December 20, 2019
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- Published: December 20, 2019
Mission summary and headline findings
- Mission led by Mr. Shanaka J. Peiris visited Myanmar from December 4 to 19, 2019 to conduct discussions for the 2019 Article IV consultations.
- Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- Recent performance:
- Growth is estimated at 6.5 percent in 2018/19, up slightly from 6.4 percent in 2017/18.
- Fiscal deficit widened slightly to 3.5 percent of GDP in 2018/19, compared to 3.0 percent in 2017/18.
- Current account deficit halved in 2018/19 to 2.0 percent of GDP.
- Headline inflation stood at 8.6 percent as of end-September 2019 largely due to one-off factors (higher electricity tariffs, food, and fuel prices).
Medium-term outlook and risks
- Medium-term growth is likely to remain below potential despite favorable long-term dynamics (positive population dynamics and Myanmar’s strategic location).
- For 2019/20, growth is expected to be broadly stable with higher government spending largely offset by pre-election uncertainty and weaker private demand.
- Inflation is expected to fall to 6-7 percent in the medium term as one-off impacts subside.
- Downside risks:
- Domestic: insufficient fiscal acceleration could depress growth; delayed restructuring and recapitalization of the banking system could increase systemic risks with large macro-financial spillovers; deterioration of the security situation and continued humanitarian issues in Rakhine could weigh on sentiment.
- External: rising trade tensions and global market volatility, higher crude oil prices, and spillovers from a slowdown in China.
Policy recommendations
- Fiscal policy:
- Aim to raise tax revenues that remain very low by international standards and boost SDG-related spending.
- A modestly higher fiscal deficit would still maintain debt sustainability but should be fully financed through issuance of market-based securities and concessional external loans, while central bank financing is gradually phased out.
- Institute a public private partnership (PPP) framework to improve project selection and ensure value-for-money through competitive bidding, building on the project bank regulation.
- Strengthen profitability and governance of state economic enterprises (macro-critical).
- New petroleum production sharing contracts should rely on a revised model contract to help maximize revenues and ensure transparency.
- Expedite finalization of new power purchase agreements through enhanced inter-ministerial coordination with due regard to cost competitiveness and fiscal risks.
- Monetary and exchange rate policy:
- Continue exchange rate flexibility to cushion external shocks.
- Active control of monetary conditions and fading one-off supply-side pressures should reduce inflation.
- Upgrade monetary and FX operational framework, including allowing greater interest rate flexibility, to anchor inflationary expectations and strengthen the monetary transmission mechanism.
- Continue work to ensure full compliance with international standards on anti-money laundering and combating the financing of terrorism ahead of upcoming Asia-Pacific Group reviews in 2020.
- Financial sector and banking:
- Ensure the banking sector is sufficiently capitalized, regulated, and supervised to support lending to productive sectors.
- Bank restructuring should follow new prudential regulations and be part of a comprehensive financial sector reform strategy to minimize eventual clean-up costs and risks of negative spillovers.
- Structural and development policy:
- Continue reforms to improve governance and reduce the cost of doing business to attract private investment.
- Consistent implementation of structural reforms and scaling up needed infrastructure plus faster resolution of security and humanitarian issues would support higher external financing and more sustainable development.
- Full implementation of the Myanmar Sustainable Development Plan (MSDP) and targeted scaling up of infrastructure and human capital spending can help achieve the SDGs and boost sustainable growth.
- Continued capacity development to support reform implementation and institution building is critical to achieving the goals set in the MSDP.
Financial and reform measures welcomed
- Recent reforms noted by staff:
- Increase in electricity tariffs.
- Liberalization of the financial sector including opening to foreign insurance companies and banks.
- Move to greater exchange rate flexibility.
- Staff encouraged continuation and deepening of these reforms.
Mission engagement
- Staff team met with:
- Governor and Deputy Governors of the Central Bank of Myanmar.
- Union Minister and Deputy Ministers of Ministry of Planning, Finance and Industry.
- Senior government officials, members of parliament, private sector business and financial representatives, and development partners.
- IMF Communications contact: PRESS OFFICER: Keiko Utsunomiya; Phone: +1 202 623-7100; Email: MEDIA@IMF.org
Selected economic indicators (2015/16–2021/22) — key figures preserved exactly as presented
- Real GDP (annual growth rates):
- 2015/16: 6.4
- 2016/17: 5.8
- 2017/18: 6.5
- 2018/19: 6.0
- 2019/20: 6.2
- 2020/21: (not shown)
- 2021/22: (not shown)
- CPI (end-period; base year from 2014/15=2012):
- 2015/16: 3.9
- 2016/17: 3.4
- 2017/18: 8.6
- 2018/19: 9.5
- 2019/20: 7.7
- 2020/21: 6.6
- Consolidated public sector (percent of GDP) — Total revenue:
- 2015/16: 19.6
- 2016/17: 18.3
- 2017/18: 18.8
- 2018/19: 18.0
- 2019/20: 18.1
- 2020/21: 18.4
- Consolidated public sector — Tax revenue:
- 2015/16: 7.1
- 2016/17: 6.8
- 2017/18: 7.2
- 2018/19: 7.5
- Consolidated public sector — Total expenditure:
- 2015/16: 23.4
- 2016/17: 21.0
- 2017/18: 21.8
- 2018/19: 21.5
- 2019/20: 22.2
- 2020/21: 22.5
- 2021/22: 22.8
- Net lending (+)/borrowing (-):
- 2015/16: -3.9
- 2016/17: -2.7
- 2017/18: -3.0
- 2018/19: -3.5
- 2019/20: -4.1
- 2020/21: -4.4
- Domestic public debt:
- 2015/16: 22.0
- 2016/17: 23.3
- 2017/18: 26.3
- 2018/19: 23.0
- 2019/20: 23.5
- 2020/21: 24.0
- Money and credit (percent change) — Broad money:
- 2015/16: 16.5
- 2016/17: 21.4
- 2017/18: 18.6
- 2018/19: 15.4
- 2019/20: 12.6
- 2020/21: 10.5
- 2021/22: 10.8
- Domestic credit:
- 2015/16: 30.1
- 2016/17: 22.3
- 2017/18: 14.5
- 2018/19: 11.1
- 2019/20: 11.7
- Private sector credit:
- 2015/16: 33.9
- 2016/17: 27.4
- 2017/18: 21.2
- 2018/19: 16.4
- 2019/20: 12.9
- Balance of payments — Current account balance:
- 2015/16: -4.2
- 2016/17: -6.5
- 2017/18: -2.0
- 2018/19: -3.4
- 2019/20: -3.7
- CBM reserves (gross) (In millions of U.S. dollars):
- 2015/16: 4,835
- 2016/17: 5,141
- 2017/18: 5,462
- 2018/19: 5,667
- 2019/20: 5,830
- 2020/21: 6,091
- 2021/22: 6,549
- Total external debt (billions of U.S. dollars):
- 2015/16: 12.7
- 2016/17: 12.3
- 2017/18: 18.9
- Total external debt (percent of GDP):
- 2015/16: 20.0
- 2016/17: 29.8
- 2017/18: 24.1
- 2018/19: 22.4
- 2019/20: 21.1
- Exchange rates (kyat/$, end of period) — Official exchange rate:
- 2015/16: 1,226.1
- 2016/17: 1,357.7
- 2017/18: 1,551.5
- 2018/19: 1,533.0
- Memorandum items — GDP (billions of kyats):
- 2015/16: 74,216
- 2016/17: 82,700
- 2017/18: 92,789
- 2018/19: 105,012
- 2019/20: 120,872
- 2020/21: 138,076
- 2021/22: 157,026
- Memorandum items — GDP (billions of US$):
- 2015/16: 60.4
- 2016/17: 61.5
- 2017/18: 67.1
- 2018/19: 68.5
- 2019/20: 74.8
- 2020/21: 81.8
- 2021/22: 89.5
- Memorandum items — GDP per capita (US$):
- 2015/16: 1,210
- 2016/17: 1,267
- 2017/18: 1,279
- 2018/19: 1,242
- 2019/20: 1,321
- 2020/21: 1,440
- 2021/22: 1,593
Source: IMF staff statement concluding the 2019 Article IV visit to Myanmar (December 20, 2019).