Beginning in 2011, Myanmar launched fundamental political and economic reforms aimed at increasing openness, empowerment, and inclusion. The past years have seen a dramatic increase of political and civil liberties and a significant reduction in armed conflict. At the same time, new tensions and challenges have emerged, including outbreaks of violence in minority ethnic areas.
Despite such setbacks, there are opportunities to further deepen the reforms, including in the 2015 parliamentary elections and efforts to reach the nationwide ceasefire agreement with key ethnic armed groups. These transitions have the potential to create opportunity and shared prosperity for the people of Myanmar and for the country to resume its place as one of the most dynamic economies in Asia.
As the largest country in mainland Southeast Asia, Myanmar has one of the lowest population densities in the region, with fertile lands, significant untapped agricultural potential, and a rich endowment of natural resources. Its geographic location at the intersection of China and India, two of the world’s most dynamic economies, makes it well positioned to resume its traditional role as a regional trading hub and a key supplier of minerals, natural gas, and agricultural produce.
Myanmar’s economy grew at 8.5 percent in real terms in 2014/15 but growth is projected to moderate to 6.5 percent in 2015/16 due to floods and slowing investments. Economic reforms have supported consumer and investor confidence despite ongoing business environment and socio-political challenges. Rapidly rising demand for investment-related imports has widened the current account deficit. This together with the general strengthening of the US Dollar has put pressure on Myanmar’s exchange rate. Rapid growth in credit to the private sector has fueled monetary expansion. Inflation is estimated to have reached over 10 percent in the year to July. Medium-term economic growth prospects remain strong assuming continued progress on reforms.
Poverty in Myanmar is disproportionately concentrated in rural areas, where poor people are relying on agricultural and casual employment for their living. There are also a substantial number of households living near the poverty line who are considered to be vulnerable to poverty; the welfare of these households is likely to be sensitive to economy-wide shocks. Since the majority of the poor are engaged in subsistence agriculture, the consumption patterns of these households may be shielded from recent inflationary pressures but the urban poor are likely to be highly affected by recent bouts of food price inflation.
Among ASEAN countries, Myanmar has the lowest life expectancy and the second-highest rate of infant and child mortality. Less than one-third of the population has access to the electricity grid, road density remains low, at 219.8 kilometers per 1,000 square kilometers of land area, and ICT connections are still underdeveloped, with mobile phone and internet penetration rates at 20% and 10% in 2014, respectively. With two private telecom operators having started operations in late 2014, there should be significant increase in mobile phone and internet penetrations.
Growth has accelerated since the transition, buoyed by improved macroeconomic management, increased gas production and exports, and stronger performance in non-gas sectors as the economy opened up.