Where did all that foreign interest in the Myanmar economy go?
Where did all that foreign interest in the Myanmar economy go?
The country posted relatively lacklustre economic growth in 2016
Myanmar has riveted the world’s attention since it embraced democratic processes in 2011 and ended decades of junta rule. However, the market’s star may be on the wane.
In its new “Global Economic Prospects” study, The World Bank attributed the moderating economic growth in the country due to a correction in the real estate market and an adjustment in the construction sector, coupled with weak external demand.
The country ended 2016 with a real-term gross domestic product (GDP) growth of 6.5 percent, marking the first time in five years that its economy grew below 7 percent.
While the figure is still one of the region’s most impressive — Thailand and Malaysia posted a 3.1 percent and 4.2 percent GDP growth, respectively — it is a decrease of 1.3 percentage points from The World Bank’s June forecast. This puts Myanmar behind stellar GDP growth rates seen in Laos (7 percent), Cambodia (7 percent), and the Philippines (6.8 percent).
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The root cause of the deceleration could be a decline in foreign investment, Myanmar-based economist Seiichiro Sato told the Nikkei Asian Review.
The value of approved foreign direct investment (FDI) in the country between April and December decreased 28 percent from the same period in 2015 to USD3.5 billion, according to the Directorate of Investment and Company Administration (DICA). Total FDI in the last fiscal year was a decrease of USD1 billion from the previous one, according to DICA director general U Aung Naing Oo.
Remarkably enough, US companies did not funnel any FDI into Myanmar between October, when the Obama administration lifted economic sanctions on the country, and the end of December, the Nikkei Asian Review reported.
“Many investors, including foreign firms, are waiting to see because the government’s economic policy remains unclear,” said Junya Ishii, a senior analyst at Sumitomo Corporation Global Research.
Myanmar’s new Investment Law will take effect in April with provisions consolidating those of the 2012 Foreign Investment Law and the 2013 Citizens’ Investment Law.
Read next: What the lifting of US sanctions means for Myanmar’s property market
Source: Property Report