Myanmar’s economic growth to recover but FDI under threat: ADB

Myanmar’s economic growth is expected to recover in the coming 2020-21 fiscal year, but the impact of a weakened global economy may affect foreign direct investments (FDI) into Myanmar in the future, according to a recent outlook report by the Asian Development Bank (ADB).

Myanmar FDI approvals increased to US$4.3 billion for the three quarters ending June 2020 from US$3.2 billion in the same period last year, with investors focused on power generation, real estate development, and manufacturing.

But the COVID-19 pandemic continues to disrupt global economic activity, developing Asia’s GDP is now expected to contract by 0.7pc in 2020, the region’s first recession in nearly six decades. This could dampen future investment inflows, the ADB said.

Meanwhile, data showed that COVID-19 could slow Myanmar’s economic growth to just 1.8 percent in fiscal 2019-20 compared to 4.2pc forecasted April. That’s a halving of the country’s GDP as demand and supply shocks stemming from the pandemic has caused a broad and significant contraction in both the global and domestic economy.

In Myanmar, manufacturing, especially of garments, is among the most affected by these demand and supply shocks. While manufacturing businesses resumed operations after the relaxation of COVID-19 containment measures in May and June, weaker global demand has hindered a return to full capacity.
Now, the increasing number of reported COVID-19 cases since late August may trigger stricter containment measures and result in further disruptions in business activities.

With the sharp contraction in the garment industry, manufacturing exports in the first three quarters of fiscal 2019-20 dropped by 4.4pc from the same period a year earlier.

However, the situation in Myanmar could still recover if supported by stable performance in agriculture, higher government spending and expansion in the telecommunications industry, the ADB said.

To be sure, agriculture appears to be less exposed to COVID-19 than other sectors and has been supported by strong domestic and external demand, as well as relatively favorable weather. Growth in agricultural exports—mainly rice, beans, and other pulses—accelerated by 19.5pc in the first three quarters of fiscal 2019-20, from October 2019 to June 2020, over the same period of the previous fiscal year.

Supported by agriculture, Myanmar exports rose by 2.7pc in US dollar terms in the first half of 2020 from a year earlier. This is despite the fall in demand for other goods manufactured in Myanmar. Meanwhile, imports increased by 9.2pc, largely driven by the purchase of capital and investment goods for government infrastructure projects. The trade deficit has now widened to US$1.8 billion.

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Source : Myanmar Times

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