Country Risk Service Myanmar July 2012 Updater

Country Risk Service Myanmar July 2012 Updater

OVERVIEW

The government is expected to maintain a conciliatory stance towards its opponents, including the pro-democracy leader, Aung San Suu Kyi. Although members of the opposition National League for Democracy won 43 of 45 parliamentary by-elections held on April 1st, the military and its allies will continue to dominate the legislature. Progress towards political liberalisation is likely to be sufficient to persuade Western governments to lift sanctions fully starting in 2013, paving the way for greater capital inflows. The economy will expand by 5% in fiscal year 2012/13 (April-March) and by 5.3% in 2013/14. Growth will accelerate to 6.4% a year on average in 2014/15-2016/17 as the removal of sanctions prompts a surge in foreign investment. Consumer price inflation is forecast to average 6.2% a year in 2012-16.

Key changes from last month

Political outlook

Sectarian clashes and continued fighting between the military and the Kachin minority have underscored the risks that ethnic divisions pose to political stability. The president, Thein Sein, appears determined to continue to work with Aung San Suu Kyi, belying speculation that the opposition leader's recent cautionary comments about investing in Myanmar would open a rift between her and the government.

Economic policy outlook

New laws on foreign direct investment and special economic zones are in the works but have faced delays. The government is making progress towards reducing the budget deficit, but a long list of further fiscal and monetary reforms are needed.

Economic forecast

Official data show that falling food prices caused year-on-year consumer price deflation in February, March and April 2012. Although inflationary pressures are expected to increase in the remainder of the year, consumer price inflation is forecast to moderate to an average of 4.4% in 2012, from 5% in 2011.

Please Note: Due to the Nature of This Report The Toc is Not Available