Myanmar: Country Economic Forecast: 16 Aug 2010 - Excel

Growth slowed to an estimated 3.6% in fiscal 2008 and 4.8% in fiscal 2009 having posted double-digit growth according to official data throughout the previous seven years. While much of the deceleration since reflects the fact that official GDP data overstates growth, it is also partly due to the impact of the global recession. While Myanmar does not have financial and trade links with the West, growth was affected via the collapse in commodity prices which hit the export prices of its gas and agricultural products as well as by the impact of slowing demand in its neighbours, especially Thailand and Malaysia, which dampened remittances and gas export volumes. In addition, the cyclone damage to agriculture in May 2008 depressed growth. In 2010 and 2011, we expect GDP growth to accelerate a little to 5.2% and 5.5% respectively. Economic activity will benefit from higher commodity prices and a gradual bounce back in agricultural output, as well as by government spending - especially on infrastructure. Inflation is on the rise again due to unfavourable base effects, rising commodity prices, and modestly increasing domestic demand. We forecast it will average 7% in 2010 and 8.5% in 2011. The current account deficit is projected to widen to nearly 2% of GDP this year due to a large increase in imports of capital goods outweighing higher merchandise exports