Investment in Burma’s energy sectors will speed up economic growth in the coming year although the ruling junta will continue to run wide fiscal deficits, a report states.
Discounting the expansion of the gas and hydropower industries, the Burmese economy will remain weak and growth “sluggish” in 2010-11, the monthly Economist Intelligence Unit (EIU) report says.
It warned however that natural gas production, which is rapidly becoming the cornerstone of Burma’s export sector, has plateaued and won’t record strong growth until new fields come on stream, which likely won’t be until 2013 at the earliest. Burma is currently embroiled in a dispute with Bangladesh over ownership of offshore gas blocks that isn’t likely to be resolved until 2014, while a lucrative gas deal with China won’t become functional until 2012.
Burma remains one of the world’s least developed countries, and was last year ranked 138 out of 182 countries in the UN’s Human Development Index. The UN Development Programme said last month that Burma would struggle to meet any of the Millennium Development Goals by 2015.
Its slow growth has been made starker by the accelerating economies of neighbouring China, Thailand and India, which are now pouring money into Burma’s energy sector.
Regardless of new investments, however, its projected GDP growth rate for next year is less than one percent, a figure more akin to the world’s most developed countries, and nothing close to the nine percent and six percent respectively for China and India, two emerging economies.
If the status quo remains in Burma, increasing foreign investment will do little to benefit the country as a whole: decades of military rule and economic mismanagement means that little wealth has reached Burmese people – the average annual wage stands at around US$220, and the government spends 1.8 percent of its budget on healthcare, compared to an average of 6.4 percent across Southeast Asia.
The report also pointed a figure at the government’s myopic focus on channeling money into strengthening the military, as well as the billions of dollars that have gone into building the new capital, Naypyidaw.
There was a small bit of good news for the country’s “buoyant” agriculture sector, which was hit hard by cyclone Nargis in May 2008 but “rebounded in 2009”. The report warned however that ongoing lack of government investment and access to equipment means that it will “continue to struggle to grow rapidly”. Moreover, the effects of foreign aid that contributed to its revitalisation could taper off in the coming years.
The ruling junta has announced it will hold elections later this year, and analysts speculate that a new pseudo-civilian government will take the reins, with many of the old guard of the military holding onto key positions.
US and EU sanctions on the country look set to remain in place in the near future in an attempt to further isolate the economy, although their impact has been dampened by ongoing trade with Southeast Asian countries. One of the few tangible impacts of sanctions has been on the country’s once-rich gem sector, which has dwindled in tandem with a tightening boycott and lacklustre global demand for precious stones.
The EIU report said however that a replenished regional demand for timber and pulses will strengthen that area of the market, despite warnings from environment groups that Burma is suffering from alarming rates of deforestation.