The International Monetary Fund has warned that the Myanmar economy “appears to be losing momentum”, citing concerns over fallout from the Rohingya refugee crisis and weaknesses in the banking sector, The Myanmar Times reported on April 21.
“A prolonged humanitarian crisis and any withdrawal of trade preferences could reduce concessional donor financing and investment leading to lower growth,” the IMF said.
The fragility of its banks presents another risk, the Myanmar Times quoted the IMF as saying. Macro-financial spillovers from ongoing restructuring of the banking sector may become more severe if banks delay recapitalization, the IMF warned.
Headline inflation was moderate in fiscal 2017-2018, averaging 4.0%, but is rising now because of increased fuel prices and depreciation of the Myanmar currency, the kyat. The kyat has depreciated 14.5% since April 2018.
Despite the IMF’s assessment that the country has “favorable long-term prospects”, growth is expected to “remain below potential” this year due to weakening export demand and subdued private construction activity.
Economic growth, currently at around 6%, is subject to downside risks related to the refugee crisis. External uncertainties include trade tensions, high crude oil prices and spillovers from exposure to the Chinese economy.
The Myanmar Times quoted the government’s economic adviser Sean Turnell as saying that the IMF’s concerns about risks related to the refugee crisis were valid and “relate not just to the internal effects of such crises, but also to those that might come from counter-productive international responses to them.”
On the issue of banking sector fragility, Turnell emphasized that the risks were “about legacy structural issues surrounding the banks bequeathed to the current administration” and that “reform is well underway.”