Washington, DC (BBN)– International Monetary Fund (IMF) has projected that the real gross domestic product (GDP) of Burma, officially known as Myanmar, is expected to accelerate slightly to 8.50 percent in fiscal year (FY) 2014-15 from 8.25 percent in the FY 14, led by rising gas production and investment.

Inflation is expected to remain contained at around 6.50 percent in FY 15 while increasing capital inflows outweigh a widening external current account deficit, according to the IMF projection. “Broad money and credit to the economy will continue to expand at double-digit rates.”
“There are, however risks to the outlook. Fiscal and external buffers remain thin and demand-side pressures on inflation and large capital inflows will strain the still-infant macroeconomic management tools,” the IMF said in a statement on Tuesday.

It also said the expected entry of foreign banks to the already rapidly growing financial sector will place further demands on macroeconomic policy and stretch scarce supervision capacity. “Fiscal risks are also rising despite recent reductions in the fiscal deficit.”  
These stem from the use of external borrowing to finance off-budget operations, increasing tax exemptions and changing relations with state and regional governments and state economic enterprises (SEEs), it added.

The IMF issued the statement after completing its article IV mission consultation discussions with the Burmese authorities. An IMF team, led by Matt Davies, visited the East Asian country during June 4–17 in this connection.

The mission met with Minister of President’s Office U Soe Thane, Union Minister of Finance U Win Shein, Central Bank of Myanmar (CBM) Governor U Kyaw Kyaw Maung, as well as other senior officials, parliamentarians, representatives from private sector and civil societies, donors and the diplomatic community.

The IMF also said the FY 15 fiscal deficit is expected to remain within the authorities’ 5.0 percent-of-GDP deficit target.

However, this is in part due to large one-off revenues from telecom licences.

Keeping the underlying medium-term deficit under 5.0 percent of GDP, while also expanding development spending, requires increased tax revenues.

“This relies on policy reforms that create a system that is easy to comply with and enforce, with minimal exemptions. It also needs further progress in reforming tax administration. Increasing the share of concessional financing will provide space for more development spending.”

BBN/SSR/AD-18June14-10:35 am (BST)