EIU August 2011 Main Report on Burma

Country Report

Myanmar (Burma)

August 2011
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Myanmar (Burma)

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Myanmar (Burma)
Executive summary
3
Highlights

Outlook for 2011-12
4 6 7
Political outlook Economic policy outlook Economic forecast

Monthly review: August 2011
10 12 12
The political scene Economic policy Economic performance

Data and charts
15 16 17 18 19 20
Annual data and forecast Quarterly data Monthly data Annual trends charts Monthly trends charts Comparative economic indicators

Country snapshot
21 22
Basic data Political structure

Editors: Editorial closing date: All queries: Next report:

Danny Richards (editor); Ananda Guha (consulting editor) August 1st 2011 Tel: (44.20) 7576 8000 E-mail: [email protected] To request the latest schedule, e-mail [email protected]

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Myanmar (Burma)

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Myitkyina Myitkyina

CHINA
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Bay of Bengal

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THAILAND

Main railway Main road International boundary Main airport Capital Major town Other town
( ) Pre-1989 names
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Andaman Sea

(Tavoy) Dawei (Tavoy)

INDIAN OCEAN
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Mergui archipelago

Gulf of Thailand

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Executive summary
Highlights
August 2011
Outlook for 2011-12 • The establishment of new institutions of government in Myanmar has, in the words of the constitution, created a "disciplined multiparty democratic system", but the balance of power will remain firmly in the military's hands. • Although allowing the pro-democracy leader, Aung San Suu Kyi, greater freedom, there is a risk that the government's limited tolerance of opposition will soon be tested. • Regional allies will push for a loosening of Western economic sanctions, but the US and the EU are unlikely to withdraw these policies until there are clear signs of genuine political reform. • The new cabinet is dominated by former generals who have been reappointed to their previous posts, and as a result there is unlikely to be an immediate improvement in the quality of economic policymaking. • Recent developments on the political front are not expected to have a major bearing on the economy. Real GDP growth will be driven by investment from Asia in the power and petroleum sectors, and also in infrastructure. • Consumer price inflation will accelerate to an annual average of 11.6% in 2011, from 7.7% in 2010. As global commodity prices fall in 2012, inflation will slow to 8.2% on average. Monthly review • The government has warned Aung San Suu Kyi to avoid political activities, but this did not prevent her from travelling outside Yangon in July, the first such trip since she was released from house arrest in November 2010. • Sporadic fighting between the military and ethnic-minority groups has continued in Kachin, Karen and Shan states. • In June a visiting EU delegation met with senior government officials and opposition members to determine whether the new regime had any intention of beginning meaningful political reform. It detected signs of change. • The continued rise in the stock of government debt suggests that officials are running a large fiscal deficit. However, a number of construction projects could be delayed in an effort to control spending. • A further US$445m in new foreign direct investment (FDI) was approved in March, pushing the total approved FDI in fiscal year 2010/11 (April-March) to US$20bn. However, there are no actual data for disbursed FDI. • The import bill soared in the first quarter of 2011, and as a result Myanmar recorded its first quarterly merchandise trade deficit since 2003.

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Myanmar (Burma)

Outlook for 2011-12
Political outlook
Political stability The establishment of new institutions of government in Myanmar has, in the words of the constitution, created a "disciplined multiparty democratic system", but the balance of power will remain firmly in the hands of the military and its leading clique. A formal handover of power from the State Peace and Development Council (SPDC, the long-standing military junta) to a presidential administration operating alongside a partly elected legislature took place in late March. This followed the inaugural session of the newly elected parliament. In a surprising move, Senior General Than Shwe, the long-time chairman of the SPDC (which has now been dissolved), has ceded his all-powerful role as commander-in-chief of the military to a more junior ally, General Min Aung Hlaing. It is not clear whether General Than Shwe will still sit on the National Defence and Security Council, which can make certain decisions without legislative approval, including the declaration of a state of emergency. However, he is expected to remain a powerful figure behind the scenes. Supporting the view that recent political changes will not mean a loosening of the military's grip on power, the composition and leadership of the new legislature is dominated by the military and its political allies, while a former general, Thein Sein, who held the post of prime minister in the outgoing government, is Myanmar's new president. If the leading generals had intended to move towards genuine democracy, one of their first steps would have been to pursue dialogue with popular opposition groups. However, despite having released the country's pre-eminent opposition leader, Aung San Suu Kyi, from house-arrest just a week after holding elections in November 2010, the military's leaders have shown no signs of being interested in holding talks with her party, the National League for Democracy (NLD), which boycotted the elections and as a result is now technically an illegal association. Nevertheless, the civilian administration has quickly adopted the rhetoric of democracy and reform. In his inaugural speech as president, Thein Sein promised greater transparency and accountability in government, stating that it should not "obstruct the fundamental rights of a citizen" when upholding laws and procedures. However, the new regime is expected to remain repressive. Myanmar's history contains a number of reminders of the generals' brutality in dealing with those who dare to challenge their authority. The ongoing political uprisings in the Middle East and North Africa have led to speculation that the military in Myanmar could yet be overthrown, but there are no signs that a major civil protest is brewing. However, it is still possible that the regime will struggle to contain the popular forces for change that will be galvanised by Aung San Suu Kyi's leadership. The opposition leader has lost none of her mass appeal and remains the figurehead for the democracy movement. Although she was permitted to travel outside Yangon (Myanmar's former capital and its largest city) in July, it was a fairly low-key trip, and she avoided making public speeches. If she were to make future trips, attracting large crowds and making

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statements calling for political reform, this could provoke a response from the new government. Although the NLD leader insists that she is willing to work with the military's leaders and its representatives in political office, she appears determined to effect change that will ultimately place power in the hands of the people. It therefore seems inevitable that the government's limited tolerance of opposition and dissent will soon be tested again. The military is engaged in conflict with militias linked to a number of ethnicminority groups. During the past year or so tensions have escalated in several areas because of the SPDC's policy of forcing ethnic groups to transform their armies into Border Guard Forces that are controlled by the military. Most of the organisations are reluctant to do so, as they see their armed wings as a guarantee of a degree of self-determination. In recent weeks violence has escalated in several areas, including the collapse of the ceasefire in Kachin state. Election watch The military-aligned Union Solidarity and Development Party (USDP) won the November 2010 election by a large margin, securing a significant majority of contested seats in the 440-seat Pyithu Hluttaw (People's Assembly, the lower house of parliament), the 224-seat Amyotha Hluttaw (Nationalities Assembly, the upper house) and the 14 state and regional assemblies. (In both national chambers, 25% of seats are reserved for appointees representing the military.) The polls were marred by serious irregularities, notably the manipulation of advance voting on a sufficiently large scale to hand victory to USDP candidates, but pro-democracy and ethnic-minority parties picked up a few seats in the legislature. The parliamentary term runs for five years, and there will therefore not be another election in the forecast period. Myanmar will continue to receive the support of important allies in Asia, most notably China, India and Myanmar's fellow members of the Association of South-East Asian Nations (ASEAN). Following the elections, the regime received praise from these allies, which applauded the polls as a positive development in the country's political reform process. However, other ASEAN members do not yet appear comfortable with the idea of Myanmar's taking its turn as chair of the grouping. (At the most recent summit of the organisation's leaders, which was held in Indonesia in May, the Burmese government indicated its intention of taking its turn to lead the body in 2014.) Clearly, ASEAN remains concerned that giving Myanmar this opportunity would undermine its credibility, not least because many Western governments condemned the recent elections as a sham, asserting that they had been neither free nor fair. Regional allies will push for a loosening of Western economic sanctions, but the US and the EU will continue to monitor their policies on sanctions and restrictions. The European bloc recently announced that it would relax travel and financial restrictions on some members of the Burmese government, including the foreign affairs minister, Wunna Maung Lwin. But for Western governments to reduce greatly the severity of sanctions and restrictions, a number of conditions would need to be met. For example, in the US the 2003 Burmese Freedom and Democracy Act requires that several changes be made in Myanmar, including the release of all political prisoners, before sanctions can be lifted.

International relations

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Economic policy outlook
Policy trends Despite Thein Sein's positive talk on reforms, the new administration has yet to draft any major policy initiatives aimed at bolstering the domestic economy or improving the business environment. Some steps have been taken recently to try to contain inflation, but policymaking still tends to be conducted on an ad hoc basis, focusing on dealing with short-term issues at the expense of planning for the medium term. In terms of fiscal policy, officials are likely to continue to focus on spending heavily on the military and will do little in the way of implementing policies to support households and businesses. The already extensive business links of currently serving and retired generals are set to continue to dominate the economy, and corruption will remain pervasive, with little transparency in the issuance of business licences and permits. The recent emphasis on privatisation appears to be intended to provide members of the military's leading clique and their business associates with the opportunity to gain control of formerly state-owned assets, rather than to introduce genuine competition. The government is likely to run a substantial fiscal deficit in 2011-12. Central government tax revenue is likely to continue to grow rapidly in nominal terms, but it will not be sufficient to reduce the deficit, given the small revenue base. The authorities do not provide timely data on fiscal expenditure, but there is anecdotal evidence to suggest that the government has been spending heavily on large projects (such as the development of the new capital city at Naypyidaw) that provide benefits to the military and its leaders, borrowing funds from the Central Bank of Myanmar and other sources to support such schemes. There have also been reports that 23.7% of total spending in the budget for fiscal year 2011/12 (April-March) has been allocated to the military. However, there are indications that the new government will cut or at least delay expenditure on some construction projects in Naypyidaw. The willingness of the central bank to print money to finance the government's deficit means that monetary policy is in practice unavailable as a tool with which to steer the economy. The outstanding stock of the central bank's claims on the government has risen sharply in recent years: at the end of 2010 the stock was more than double the level recorded at the end of 2006. The bank is clearly not operationally independent from the government and, unlike most other central banks in Asia, it is therefore not expected to raise interest rates in response to the current acceleration in inflation in the region. The last time that it altered rates was in 2006, when it made the first adjustment in five years, raising its leading indicator rate by 2 percentage points, to 12%.

Fiscal policy

Monetary policy

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Economic forecast
International assumptions
International assumptions summary
(% unless otherwise indicated) 2009 Real GDP growth World OECD China EU27 Exchange rates ¥:US$ US$:€ SDR:US$ Financial indicators € 3-month interbank rate US$ 3-month Libor Commodity prices Oil (Brent; US$/b) Gold (US$/troy oz) Food, feedstuffs & beverages (% change in US$ terms) Industrial raw materials (% change in US$ terms) -0.7 -3.5 9.2 -4.2 93.7 1.393 0.646 1.23 0.69 61.9 973.0 -20.4 -25.6 2010 4.9 2.9 10.3 1.8 87.9 1.326 0.652 0.84 0.34 79.6 1,224.7 11.7 44.5 2011 4.3 2.5 9.0 2.0 82.3 1.367 0.635 1.33 0.41 108.5 1,424.8 30.0 29.3 2012 4.2 2.3 8.7 1.7 81.0 1.263 0.653 1.88 0.79 94.5 1,247.5 -11.8 -10.4

Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

Economic growth

The outlook for Myanmar's economy remains mixed. Large projects funded by investors from China, South Korea and Thailand have been approved in a number of sectors (mainly power, petroleum and infrastructure) and these will support accelerating economic growth in the forecast period. However, excluding these projects (which are likely to require imports of capital goods and construction materials), the domestic economy will remain sluggish. The agricultural sector is benefiting from the current high level of international commodity prices, but growth in the sector will be restricted by a lack of investment and poor access to important inputs and equipment. The manufacturing sector will remain troubled, reflecting the difficulties that it faces in obtaining essential inputs and investment capital. Gas production has plateaued and will not resume strong growth until new fields come on stream— something that will not happen until 2013 at the earliest. However, the recent strong growth in the export-driven gem-mining sector will be maintained, and there are signs that production of jade and other gems is picking up swiftly, driven by recovering regional demand, allowing the sector to shrug off the impact of sanctions on Myanmar's international trade. The outlook for growth in private consumption and investment by local enterprises is also fairly bleak. Rising imports of consumer goods suggest that consumer spending improved in 2010, but it will be constrained this year by a sharp rise in domestic prices for food and fuel owing to trends in global commodity prices. There may be an improvement in 2012 as consumer price pressures ease and unofficial remittances from overseas workers pick up amid the continued recovery in the global economy. However, a rapid rise in consumer spending is not expected as long as average household incomes remain low. Domestic investment will be impeded by a lack of confidence and limited

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access to capital, and although investors will be granted privileges under a new Special Economic Zone Law, there are still major challenges for foreign investors in terms of doing business in Myanmar. Inflation Consumer price inflation will accelerate to an annual average rate of 11.6% in 2011, from 7.7% in 2010. Supply-side price pressures will remain high this year. Despite the recent falls in global crude oil prices, in 2011 as a whole crude oil prices (dated Brent Blend) will rise by 36% and prices for food, feedstuffs and beverages will increase by 32%. The expected decline in global commodity prices in 2012 will ensure that inflation slows in that year. But domestic inflationary pressures will remain strong, owing to the fact that the central bank will continue to finance the budget deficit by printing money, with the consequent growth in domestic credit pushing up prices. The government will maintain its highly overvalued official exchange rate in the next few years, but it could scrap Foreign Exchange Certificates (which are officially valued at parity with US dollars but are converted at slightly different rates on the black market). At the free-market exchange rate the kyat appreciated to an estimated average of Kt970:US$1 in 2010, from Kt1,055:US$1 in 2009, partly thanks to Myanmar's improved external trade position. The freemarket rate will remain relatively strong this year, averaging Kt855:US$1, but the kyat will weaken in 2012, reflecting the forecast deterioration in the trade position. Export revenue will continue on an upward trend in the next two years. Revenue from sales of natural gas, Myanmar's main export earner, will remain high but will not rise sharply until new fields come on stream in 2013 at the earliest. Revenue from other important exports, such as pulses and timber, will strengthen in line with greater regional demand. Growth in the import bill is expected to pick up pace in the next two years, driven by rapid growth in major foreign-invested projects in the oil and gas, power, mining and infrastructure sectors. Although the merchandise trade surplus will drop in 2012, it will still be sufficient to offset the combined deficit on the services and income accounts.
Forecast summary
(% unless otherwise indicated) Real GDP growthc Gross fixed investment growthc Gross agricultural production growthc Consumer price inflation (av) Consumer price inflation (end-period) Short-term interbank rate Government budget balance (% of GDP)c Exports of goods fob (US$ bn) Imports of goods fob (US$ bn) Current-account balance (US$ bn) Current-account balance (% of GDP) e 2009 a 1.8 5.0 2.5 1.5 d 2.2 d 17.0 d -4.8 6.7 4.0 0.7 2.8 2010 a 3.3 7.5 3.2 7.7 d 9.5 d 17.0 d -5.1 8.6 4.2 1.5 4.9 2011 b 3.2 10.2 3.0 11.6 11.8 17.0 -5.2 9.6 5.5 1.0 2.5 2012 b 4.7 13.0 3.2 8.2 9.4 17.0 -4.8 10.1 6.3 0.5 1.2

Exchange rates

External sector

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Forecast summary
(% unless otherwise indicated) External debt (year-end; US$ bn) Official exchange rate Kt:US$ (av)f Exchange rate Kt:US$ (av)g Exchange rate Kt:¥100 (av)g Exchange rate Kt:Bt (av)g 2009 a 8.2 d 5.5 d 1,055.0 1,125.9 30.8 2010 a 8.0 5.6 d 970.0 1,103.8 30.6 2011 b 8.1 5.3 855.0 1,039.2 28.8 2012 b 8.3 5.4 950.0 1,172.8 32.3

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years (beginning April 1st of year shown). d Actual. e Fiscal years (beginning April 1st of year shown); at free-market exchange rate (which understates the size of GDP). f Official rate (there is a wide differential between the official and free-market rates). g Free-market rate.

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Monthly review: August 2011
The political scene
The government warns Aung San Suu Kyi to avoid politics In early July the Ministry of Home Affairs reportedly wrote to Aung San Suu Kyi, the country's pre-eminent opposition leader and head of the National League for Democracy (NLD), warning her to avoid engaging in political activities. In comments that appeared in the state-run press, officials warned that the NLD had broken the law by maintaining party offices and carrying out activities such as issuing public statements. The NLD operates by way of sufferance, having technically lost its legal political status when party leaders decided to boycott the national election, held in November 2010—all parties that failed to register to contest the poll were subsequently declared to be illegal. The warning to Aung San Suu Kyi came ahead of her first planned trip outside Yangon, the former capital and Myanmar's largest city, since her release from house arrest in November 2010. Previous tours outside Yangon by the prodemocracy leader were strongly resisted by the now-dissolved military junta. Although no physical action was taken this time, the state-run media carried statements warning that a tour by Aung San Suu Kyi could lead to "chaos and riots, as evidenced by previous incidents"—a reference to the attack on the NLD leader and her convoy in 2003 at Depayin in Sagain division, orchestrated by the junta, in which some 70 of her supporters were killed. Despite the threatening tone, the nominally civilian government, which has been in place since March 2011, allowed Aung San Suu Kyi to leave Yangon and travel to the world-heritage site at the ancient city of Bagan for a week-long trip. The pro-democracy leader adopted a low-key approach to the trip, avoiding political rallies and meetings. Although the trip went without incident, the warnings issued beforehand suggest that the new government remains concerned about the possibility of an outpouring of public support for the NLD leader, as was the case in 2003. However, there are signs that the government is still willing to allow Aung San Suu Kyi some freedom to take part in public life. For example, for the first time in many years she was invited to attend the official Martyrs Day memorial in Yangon on July 19th—a day that commemorates her father, General Aung San, and six other leaders of the independence-era interim government who were assassinated in 1947. In a rare public gathering, hundreds of NLD members walked in procession from the party headquarters to the Martyrs' Mausoleum nearby. Clashes between the military and ethnic groups continue Sporadic fighting between the military and ethnic-minority groups has continued in Kachin, Karen and Shan states. In June the 17-year ceasefire in Kachin in the north of the country came to an end, as fighting broke out between the army and the Kachin Independence Army (KIA), the military wing of the Kachin Independence Organisation, which controls a large part of the state. Tensions escalated in the run-up to the November 2010 election, as a result of efforts by the junta to force a number of armed ethnic-minority groups to transform their armies into Border Guard Forces under the control of the military. This policy is opposed by a number of such groups, which see their
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armed wings as guaranteeing a degree of self-determination. In recent weeks, in addition to the fighting in Kachin state, clashes have also continued in Karen and Shan. For example, in late July some 1,500 government troops were reportedly engaged in an attack on the main outpost of the Shan State Army (a merger between a former ceasefire group, Brigade 1 of the Shan State ArmyNorth, and the Shan State Army-South). In July leaders of the recently formed United Nationalities Federal Council (UNFC), an umbrella body for armed ethnic organisations (including groups with and without ceasefires) met with an EU delegation in Thailand. The UNFC called for dialogue to solve the conflict in Kachin state. Despite numerous differences between the ethnic-minority groups, and a failure to act together in the past, the formation of the UNFC in February 2011 marks a new attempt by these organisations to show a united front, supporting each other in an effort to gain greater autonomy and bring an end to human-rights abuses by the military. As part of this strategy, the UNFC has called on the government to negotiate ceasefires with all armed groups, rather than on a case-by-case basis. The UNFC has made it clear that a failure to reach a "universal ceasefire" of this kind will mean the continuation of ethnic conflict on a number of fronts. In July the KIA proposed a six-month ceasefire, on condition that the government agrees to the UNFC playing a leading role in any peace talks. Despite meetings between KIA leaders and government officials in July, no progress was made and sporadic fighting continued. In late July the KIA claimed that it had killed 28 government troops in an ambush attack, although this was not confirmed by the authorities. Bomb blasts were reported in Kachin and Shan states in July, injuring at least 25 people. Prospects for peace were further undermined by allegations that one of the country’s two vice-presidents, Tin Aung Myint Oo, was the head of the north-east regional command at a time when several massacres took place in Kachin state, in which a number of KIA soldiers and some civilians are thought to have been tortured and killed. KIA leaders have stated that they have only made information about the attacks, the earliest of which took place in 2001, public now that the ceasefire with the government has ended. The EU sends a delegation to check on reform prospects In June a visiting EU delegation met with senior members of the government and with the opposition. Along with the US, the EU has imposed a range of sanctions on Myanmar in an effort to push the regime towards political reform, the release of political prisoners and an end to human-rights abuses. The visit in June, the first since the new government took office, was intended to explore whether the new regime has any intention of beginning meaningful political reform. During the visit the delegation met with senior members of the government, including Tin Aung Myint Oo and the foreign affairs minister, Wunna Maung Lwin, and with NLD leaders, including Aung San Suu Kyi. At the end of the trip the leader of the EU delegation, Robert Cooper, the special adviser to the EU High Representative for Foreign Affairs and Security Policy, told a press conference that the delegation had seen signs of change, and that the EU itself was "ready to change". However, the delegation made it clear that the EU wanted to see action on reform before it would consider any relaxation of its sanctions against the government.

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Economic policy
Rising debt stock indicates that the budget deficit is still wide Central government tax revenue increased by 18.5% in fiscal year 2010/11 (April-March), to Kt1.3trn (US$240bn at the official exchange rate, or around US$1.7bn at the free-market rate). Commodity, services and commercial taxes rose by 29.1%, to Kt602bn (US$110bn at the official exchange rate, or around US$770m at the free-market rate). After falling in the early part of the fiscal year, revenue from income tax (the second-largest source of tax revenue) managed modest growth of 4.9%, to Kt436bn, in 2010/11. Profit tax revenue picked up by 18.6% in the year, to Kt135bn, while revenue from customs duties jumped by 30.8%, to just under Kt60bn. The stock of government debt rose by 34% in 2010/11. By the end of the year, the value of outstanding three- and five-year government bonds stood at just under Kt1.3trn in total, up from slightly under Kt940bn at the end of 2009/10, and only Kt297bn at the end of 2008/09. The stock of outstanding five-year bonds drove the overall increase, rising to Kt490.5bn at the end of March 2011 from only Kt182.6bn in the year-earlier period. The stock of outstanding threeyear government debt showed much more modest growth, rising by 1.5% to Kt768.3bn at end-March 2011. The continued rise in the stock of government debt suggests that the authorities' fiscal position remains in deficit. The new government, which came to power in March this year, has adopted the budget plans made by the previous administration, and has shown few signs that it intends to rein in the deficit. However, in a speech in June, one of the country’s two vice-presidents, Sai Mauk Kham, stated that a number of construction projects would be delayed or shelved in the current fiscal year, in an apparent effort to control spending. Before the current government took office, the previous ruling junta spent lavishly on the building of a new administrative capital, Naypyidaw, in the centre of the country. Anecdotal evidence suggests that work on a number of projects in Naypyidaw, including libraries and museums, has been delayed in recent weeks, suggesting that the new government is seeking ways to control the deficit. However, many major projects are set to continue, and there are no signs that the government is planning to reduce military spending—a major drain on the budget.

Economic performance
Foreign investment approvals reach US$20bn in 2010/11 A further US$445m in new foreign direct investment (FDI) was approved in March, the final month of 2010/11. This pushed the total approved FDI for the fiscal year to US$20bn, a massive jump compared with a (revised) total of US$329.6m in 2009/10 and US$984.7m in 2008/09. Of the total approved FDI, the oil and gas sector accounted for just over one-half, at US$10.2bn. The power sector accounted for US$8.2bn, and the mining sector attracted a further US$1.4bn. Together, foreign investment in power, oil and gas accounted for 92% of all approved foreign investment in 2010/11. China accounted for US$8.3bn, or 41.4%, of all FDI projects approved in 2010/11; Hong Kong accounted for another US$5.8bn, or 29%, Thailand for US$2.9bn and South Korea for US$2.7bn. In

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recent years China and South Korea have invested heavily in the development of offshore oil and gas fields, while China and Thailand have invested in hydropower projects along the northern and eastern borders. There have not been any published figures on actual FDI inflows for some time, but it is likely that the rise in approvals in recent years has translated into an upturn in actual inflows. This in turn will have helped to boost demand for capital imports, but will also have helped to strengthen foreign-exchange reserves, one factor behind the recent appreciation of the free-market exchange rate against the US dollar. By late July the Burmese currency was trading at around Kt780:US$1, similar to the rate in June, having appreciated from around Kt860:US$1 in April and an annual average of Kt970:US$1 in 2010. (The official exchange rate, which is fixed against the IMF's special drawing rights, or SDRs, has not reflected this trend, standing at an average of Kt5.32:US$1 in April, compared with Kt5.57:US$1 on average in 2010.) Several other factors have helped to drive the stronger free-market kyat against the US dollar, including strong export revenue growth in 2010/11, as well as earnings from the illegal drugs trade (Myanmar is a major producer and exporter of heroin and methamphetamines.) A rare quarterly trade deficit is recorded as imports surge In the first quarter of 2011 Myanmar recorded its first quarterly merchandise trade deficit since 2003. The import bill soared to Kt13.7bn in the first quarter, up from Kt5.1bn a year earlier, while export revenue rose only marginally on a year-on-year basis, to just under Kt13bn. The sharp increase in the import bill reflected a six-fold rise in the bill for imports of refined mineral oil, to Kt3.2bn, mainly reflecting high global prices. The increase in investment in capital intensive projects, such as in the oil and gas sector and infrastructure, also contributed to a sharp rise in imports of machinery and transport equipment, which reached Kt2.8bn, up from Kt704m (US$130m at the official exchange rate, or around US$90m at the free-market rate) in the January-March 2010. Imports of other important inputs also rose, including base metals and metal items (up by 162% year on year to Kt965m). The miscellaneous imports category also recorded a sharp jump, with "other" imports standing at Kt3.1bn in the first quarter compared with Kt1.5bn in the year-earlier period. China was the main source of this expanded import bill—in the first quarter imports from China rose to Kt4.4bn from just Kt1.8bn in the year-earlier period. The sluggish growth in export revenue was mainly owing to the drop in revenue from exports of natural gas, the country’s main export earner. In the first quarter gas export revenue fell by 34% year on year to Kt4bn. (However, the officially recorded revenue stream from gas exports tends to be lumpy.) Exports of pulses (the second largest source of export revenue in 2010/11) also dragged down the overall rate of growth in export earnings—exports of pulses fell by 26% year on year, to Kt1.2bn. But rice exports rose by 91% to Kt544m, reflecting higher prices. However, the miscellaneous category of exports, which includes revenue from gems exports, rose by nearly 90% to Kt4.9bn in the first quarter. Myanmar remains a major source of gems and jade. In July the government held one of several regular gem fairs in Naypyidaw; according to local media reports, the fair generated some US$1.6bn in sales. Myanmar’s gem fairs attract

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Myanmar (Burma)

many international buyers, particularly from China, Thailand and other important regional markets for the jade and rubies, sapphires, and other gems that Myanmar produces. Despite the strong kyat, regional demand remains strong, helping to drive production. Output of all gems rose by 14.6% in 2010/11, while output of jade jumped by 81.5% in the period.
Merchandise trade
(Kt bn)
Exports 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 Imports Balance

Q1 2008

Q2

Q3

Q4

Q1 09

Q2

Q3

Q4

Q1 10

Q2

Q3

Q4

Q1 11

Source: Central Statistical Organisation.

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Myanmar (Burma)

15

Data and charts
Annual data and forecast
Pl ea se se e g ra p hi c b el ow

2006 a 11,888 b 15,217 b 3.4 b 3.0 b 15.0 b 5.0 b 12.0 b 30.0 b 3.0 b 8.2 b 1.7 b 48.7 2,505 b 4.4 b 7.1 b -2.6 b 5.78 1,280 b 28.4 26.5 27.2 16.1 2,211 4,555 -2,343 -283 -1,248 122 802 7,262 65 9 55 1,248

2007 b 16,312 21,043 3.4 2.0 15.0 6.0 10.0 9.0 1.4 9.0 3.5 49.1 a 2,643 4.2 7.2 -3.0 5.56 a 1,290 28.6 a 30.2 a 30.0 a 17.0 a 3,252 6,279 -3,027 -210 -1,395 206 1,853 8,237 a 54 a 11 a 42 a 2,312

2008 b 22,666 26,859 1.1 -1.8 15.0 10.0 2.5 4.2 2.2 7.8 -3.7 49.6 a 2,707 4.4 8.0 -3.5 5.39 a 1,185 16.0 a 6.8 a 14.8 a 17.0 a 3,028 6,916 -3,888 -258 -1,688 287 1,369 8,002 a 33 a 10 a 23 a 3,412

2009 b 26,275 27,720 1.8 0.2 12.0 5.0 5.0 12.0 2.5 1.2 1.2 50.0 a 2,757 4.5 9.3 -4.8 5.52 a 1,055 2.2 a 24.0 a 30.6 a 17.0 a 2,722 6,673 -3,951 -343 -1,911 262 730 8,186 a 29 a 9a 20 a 3,561

2010 b 31,680 30,730 3.3 1.8 8.0 7.5 8.0 5.0 3.2 4.3 2.9 50.4 2,852 4.5 9.6 -5.1 5.58 a 970 9.5 a 31.8 42.4 17.0 a 4,348 8,570 -4,222 -353 -2,641 190 1,544 7,998 31 10 21 3,762

2011 c 41,181 35,209 3.2 1.0 8.0 10.2 4.0 15.0 3.0 5.8 2.1 50.9 2,961 4.7 9.9 -5.2 5.35 855 11.8 24.5 26.1 17.0 4,121 9,621 -5,500 -387 -2,867 183 1,050 8,145 32 10 22 3,929

2012 c 41,728 39,642 4.7 2.4 6.0 13.0 5.0 18.0 3.2 8.5 5.0 51.3 3,154 4.9 9.7 -4.8 5.40 950 9.4 22.0 20.4 17.0 3,738 10,062 -6,325 -428 -3,029 205 486 8,273 34 10 23 4,104

GDPd Nominal GDP (US$ m) Nominal GDP (Kt bn) Real GDP growth (%) Expenditure on GDP (% real change)d Private consumption Government consumption Gross fixed investment Exports of goods & services Imports of goods & services Origin of GDP (% real change)d Agriculture Industry Services Population and income Population (m) GDP per head (US$ at PPP) Fiscal indicators (% of GDP)d Central government budget revenue Central government budget expenditure Central government budget balance Prices and financial indicators Exchange rate Kt:US$ (av; official rate) Exchange rate Kt:US$ (av; free-market rate) Consumer prices (end-period, %) Stock of money M1 (% change; end-period) Stock of money M2 (% change; end-period) Lending interest rate (av; %) Current account (US$ m) Trade balance Goods: exports fob Goods: imports fob Services balance Income balance Current transfers balance Current-account balance External debt (US$ m) Debt stock Debt service paid Principal repayments Interest International reserves (US$ m) Total international reserves
Source: IMF, International Financial Statistics.

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years (beginning April 1st of year shown).

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Myanmar (Burma)

Quarterly data
Pl ea se se e g ra p hi c b el ow

2009 2 Qtr Prices Consumer prices (2000=100) Consumer prices (% change, year on year) Financial indicators Exchange rate Kt:US$ (av; official rate) Exchange rate Kt:US$ (av; free-market rate)a Central bank rate (end-period; %) Deposit rate (av; %) Lending rate (av; %) M1 (end-period; Kt bn) M1 (% change, year on year) M2 (end-period; Kt bn) M2 (% change, year on year) Sectoral trends, production Natural gas (bn cu ft) Tin in concentrates (tonnes) Crude oil ('000 barrels) Jade (tonnes) Gems ('000 carats) Foreign trade (Kt m) Exports fob Imports cif Trade balance
a Economist Intelligence Unit estimates.

3 Qtr 211.6 -0.1 5.44 1,103 12.0 12.0 17.0 3,927 18.2 6,123 27.3 113 236 1,787 2,047 3,095 11,150 8,531 2,619

4 Qtr 213.9 1.3 5.35 998 12.0 12.0 17.0 4,262 24.0 6,576 30.6 105 193 1,697 4,131 3,326 8,471 3,976 4,494

2010 1 Qtr 216.0 6.5 5.51 1,007 12.0 12.0 17.0 4,747 29.5 7,280 34.1 99 93 1,616 9,351 3,447 12,662 5,056 7,607

2 Qtr 223.4 8.7 5.72 1,017 12.0 12.0 17.0 4,841 28.6 7,699 33.3 112 71 1,745 14,034 2,253 11,702 8,436 3,266

3 Qtr 227.0 7.3 5.61 960 12.0 12.0 17.0 5,117 30.3 8,351 36.4 118 231 1,751 9,386 4,238 11,418 6,360 5,058

4 Qtr 231.7 8.3 5.47 897 12.0 12.0 17.0 5,619 31.8 9,365 42.4 110 180 1,694 6,219 3,700 13,035 7,058 5,976

2011 1 Qtr 234.6 8.6 5.44 855 n/a n/a n/a n/a n/a n/a n/a 102 169 1,601 17,171 2,770 12,952 13,654 -702

205.5 1.5 5.60 1,050 12.0 12.0 17.0 3,766 14.8 5,774 24.7 111 205 1,869 10,267 1,448 9,124 5,274 3,850

Sources: Central Statistical Organisation, Selected Monthly Economic Indicators; IMF, International Financial Statistics.

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Monthly data
Pl ea se se e g ra p hi c b el ow

Jan Feb Mar Exchange rate Kt:US$ (av; official rate) 2009 5.60 5.73 5.74 2010 5.44 5.53 5.57 2011 5.50 5.44 5.38 Exchange rate Kt:US$ (av; free-market) 2009 1,190 1,000 1,015 2010 1,020 1,000 1,000 2011 850 850 865 Money supply M1 (% change, year on year) 2009 7.3 9.9 16.9 2010 24.2 26.3 29.5 2011 34.3 33.0 n/a Money supply M2 (% change, year on year) 2009 15.5 17.6 23.4 2010 30.0 31.7 34.1 2011 44.1 41.7 n/a Deposit rate (av; %) 2009 12.0 12.0 12.0 2010 12.0 12.0 12.0 2011 n/a n/a n/a Lending rate (av; %) 2009 17.0 17.0 17.0 2010 17.0 17.0 17.0 2011 n/a n/a n/a Consumer prices (av; % change, year on year) 2009 4.6 3.8 1.9 2010 5.3 6.6 7.7 2011 8.4 8.5 8.9
Sources: IMF, International Financial Statistics; Haver Analytics.

Apr 5.69 5.61 5.32 1,020 1,000 870 15.8 30.2 n/a 24.0 32.5 n/a 12.0 12.0 n/a 17.0 17.0 n/a 3.0 7.9 n/a

May 5.59 5.75 n/a 1,040 1,000 n/a 14.5 31.5 n/a 22.4 36.0 n/a 12.0 12.0 n/a 17.0 17.0 n/a 0.5 8.9 n/a

Jun 5.51 5.79 n/a 1,090 1,050 n/a 14.8 28.6 n/a 24.7 33.3 n/a 12.0 12.0 n/a 17.0 17.0 n/a 1.0 9.3 n/a

Jul 5.48 5.66 n/a 1,110 980 n/a 14.9 31.1 n/a 23.8 36.7 n/a 12.0 12.0 n/a 17.0 17.0 n/a 0.5 8.0 n/a

Aug 5.45 5.61 n/a 1,100 950 n/a 15.0 29.7 n/a 24.7 36.0 n/a 12.0 12.0 n/a 17.0 17.0 n/a -0.8 7.4 n/a

Sep 5.39 5.57 n/a 1,100 950 n/a 18.2 30.3 n/a 27.3 36.4 n/a 12.0 12.0 n/a 17.0 17.0 n/a -0.1 6.5 n/a

Oct 5.35 5.42 n/a 1,050 950 n/a 18.0 29.9 n/a 27.7 36.9 n/a 12.0 12.0 n/a 17.0 17.0 n/a 0.2 7.2 n/a

Nov 5.32 5.45 n/a 985 880 n/a 21.0 29.9 n/a 29.9 39.1 n/a 12.0 12.0 n/a 17.0 17.0 n/a 1.4 8.4 n/a

Dec 5.38 5.54 n/a 960 860 n/a 24.0 31.8 n/a 30.6 42.4 n/a 12.0 12.0 n/a 17.0 17.0 n/a 2.2 9.5 n/a

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Myanmar (Burma)

Annual trends charts
Pl ea se se e g ra p hi c b el ow

Annual trends charts
Real GDP growth
(% change)
Myanmar 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 2006 07 08 09 10 11 12 Asia (excl Japan) World 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2006 07 08 09 10 11 12

Consumer price inflation
(av; %)
Myanmar Asia (excl Japan) World

Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.

Current-account balance
(% of GDP)
Myanmar 12.0 10.0 8.0 6.0 30.0 4.0 2.0 0.0 2006 07 08 09 10 11 12 20.0 10.0 0.0 Asia (excl Japan) 70.0 60.0 50.0 40.0

Total external debt
(% of GDP)
Myanmar Asia (excl Japan)

2006

07

08

09

10

11

12

Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.

Principal exports, 2009
(share of total)
Others 45.1% Natural gas 32.8%

Principal imports, 2009
(share of total)
Others 44.1% Non-electrical machinery 26.5%

Pulses 12.1% Garments 4.0%
Source: Economist Intelligence Unit.

Refined petroleum 15.9% Electrical machinery 4.2%
Source: Economist Intelligence Unit.

Teak & hardwood 5.9%

Base metals & manufactures 9.3%

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19

Monthly trends charts
Pl ea se se e g ra p hi c b el ow

Monthly trends charts
Consumer price inflation
(% change, year on year)
40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 -5.0 Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 2007 08 09 10 11
Source: Economist Intelligence Unit.

Interest rates
(av; %)
Deposit rate 18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2007 08 09 10
Source: Economist Intelligence Unit.

Lending rate

Monetary aggregates
(% change, year on year)
M1 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 2007 08 09 10 11
Source: Economist Intelligence Unit.

Natural gas: US spot price
(US$/BTU m)
14.0 12.0 10.0 8.0 6.0 4.0 2.0

M2

Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2007 08 09 10 11
Source: Economist Intelligence Unit.

Oil: Brent crude price
(US$/b; av)
140 120 100 2,500 80 2,000 60 40 20 1,500 1,000 3,500 3,000

Tin: LME price
(US cents/kg)

Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2007 08 09 10 11
Source: Economist Intelligence Unit.

Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2007 08 09 10 11
Source: Economist Intelligence Unit.

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Myanmar (Burma)

Comparative economic indicators
Pl ea se se e g ra p hi c b el ow

Comparative economic indicators, 2010
Gross domestic product
(US$ bn; market exchange rates)
China Japan India Australia South Korea Indonesia Taiwan Thailand Malaysia Hong Kong Singapore Philippines Pakistan New Zealand Vietnam Bangladesh Sri Lanka Myanmar Cambodia Papua New Guinea Laos 0
5,824.1 5,460.3

Gross domestic product per head
(US$ '000; market exchange rates)
Australia Singapore Japan New Zealand Hong Kong South Korea Taiwan Malaysia Thailand China Indonesia Sri Lanka Philippines India Papua New Guinea Vietnam Laos Pakistan Cambodia Myanmar 0.6 Bangladesh 0.0 10.0

31.7 12.4 9.9 6.7

500

1,000

1,500

2,000

20.0

30.0

40.0

50.0

60.0

Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.

Gross domestic product
(% change, year on year)
Singapore Taiwan China India Sri Lanka Laos Thailand Philippines Malaysia Papua New Guinea Hong Kong Vietnam South Korea Indonesia Bangladesh Cambodia Pakistan Japan Myanmar Australia New Zealand 0.0

Consumer prices
(% change, year on year)
Pakistan India Vietnam Bangladesh Myanmar Papua New Guinea Sri Lanka Laos Indonesia Cambodia Philippines Thailand China South Korea Australia Singapore Hong Kong New Zealand Malaysia Taiwan Japan -2.0

2.0

4.0

6.0

8.0 10.0 12.0 14.0 16.0

0.0

2.0

4.0

6.0

8.0 10.0 12.0 14.0

Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.

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Country snapshot
Basic data
Land area Population Main towns 676,563 sq km 50m (IMF mid-2009 estimate) Population in '000 (1983 census) Yangon Mandalay 2,513 533 Pegu Moulmein 320 220

Note. In 2006 the ruling military junta moved the country's administrative capital from Yangon to the town of Naypyidaw. In the text, places other than Myanmar and Yangon are referred to by their pre-1989 names. Pre-1989 place names appear in brackets on the map at the start of this report Climate Weather in Yangon (altitude 5 metres) Language Subtropical Hottest month, April, 24-36°C; coldest month, January, 18-23°C; driest month, January, 3 mm average rainfall; wettest month, July, 582 mm average rainfall Burmese; numerous minority languages, such as Karen and Shan, are also in use Derived from the UK system. Some other units are in use. For example, 0.9842 long or imperial tons = 1 metric tonne = 1.10231 short tons. Local measures include: 1 lakh = 100,000 units; 1 crore = 10,000,000 units; 1 viss or peiktha = 100 ticles = 1.6 kg; 1 basket (paddy) = 20.9 kg; 1 basket (rice) = 34 kg 1 kyat (Kt); Kt1 = 100 pyas. Average official exchange rate in 2010: Kt5.6:US$1. Average free-market exchange rate (based on private estimates) in 2010: Kt970:US$1 6.5 hours ahead of GMT April 1st-March 31st January 4th (Independence Day); February 12th (Union Day); March 2nd (Peasants' Day); March 27th (Armed Forces' Day); April 13th-17th (Thingyan, New Year); May 1st (Workers' Day); July 19th (Martyrs' Day); November 20th (National Day); December 25th (Christmas Day); plus other holidays, the timing of which depends on lunar sightings

Measures

Currency

Time Fiscal year Public holidays

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Myanmar (Burma)

Political structure
Official name Form of state The executive Republic of the Union of Myanmar Under its 2008 constitution Myanmar has a multiparty democratic system, but institutions of power are dominated by the military and its leading clique A new executive, headed by a president, was formally installed on March 30th 2011, when the State Peace and Development Council, a military body that had held power since 1988, ceased to exist There are two national legislative chambers, a 440-seat Pyithu Hluttaw (People's Assembly, the lower house) and a 224-seat Amyotha Hluttaw (Nationalities Assembly, the upper house). In both assemblies 25% of seats are reserved for appointees representing the military, while the other members are directly elected The president, chosen by the Presidential Electoral College, which comprises three committees—one formed of members of the upper house, one made up of members of the lower house and one consisting of military appointees. Thein Sein was chosen as president in February 2011 alongside two vice-presidents, Lieutenant-General Tin Aung Myint Oo and Sai Mauk Kham Elections were held in November 2010 for both houses of parliament A cabinet is appointed by the president and is subject to approval by the national legislative bodies The military-aligned Union Solidarity and Development Party (USDP) secured a landslide victory in the November 2010 election. The National League for Democracy (NLD) was for more than two decades the country's main pro-democracy party, but it refused to register under new electoral laws in 2010 and no longer officially exists. An offshoot of the NLD, the National Democratic Force (NDF), contested the election, as did a number of ethnic-based political groups. Another party with close ties to the military, the National Unity Party (NUP), contested the election but fared poorly compared with the USDP USDP, NUP, NDF, Shan Nationalities Democratic Party, Rakhine Nationalities Development Party, other ethnic-based parties Agriculture & irrigation Border affairs Commerce Construction Defence Electric Power 1 Electric Power 2 Energy Finance & revenue Foreign affairs Home affairs Industrial development Industry 1 Industry 2 Mines Transport Than Nyein Myint Hlaing Major-General Thein Htay Win Myint Khin Maung Myint Major-General Hla Min Zaw Min Khin Maung Soe Than Htay Hla Tun Wunna Maung Lwin Lieutenant-General Ko Ko Major-General Thein Htay Kyaw Swar Khine Soe Thein Thein Htaik Nyan Tun Aung

National legislature

Head of state

National elections National government Main political organisations

Main political parties Key ministers

Central Bank governor

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