Andrew Mason, World Bank’s acting chief economist for East Asia and the Pacific, told a tele-press conference on Wednesday that the economic outlook for Myanmar would remain favourable, similar to other smaller economies in the region.

“Myanmar is facing some important challenges in terms of infrastructure investment, human capital and gaps in some of the basic services,” he said.

“This will require more government revenues. So, raising revenue and spending it better is an important piece of the puzzle.”

Mason also stressed the importance of improving the investment climate. He urged to reform the economy in a way to attract local and foreign investment. To him, strengthening the business environment will lead to productivity growth, which largely influences the nation’s economy.

He urged investment in human capital for long-term growth, and to invest more in basic things such as nutrition, health and education.

“That will be important for moving Myanmar from a lower-middle income economy over time to a more sophisticated upper-middle income economy,” he said.

According to Mason, another key driver of Myanmar’s growth would be the financing of infrastructure projects. He reinforced the importance of infrastructure and connectivity.

“This is something that is very important in Myanmar and other lower-middle income countries in the region. But the selection of projects is very, very important,” he said.

“We absolutely support further investment in infrastructure for creating more inclusive growth in Myanmar, but it is important to share benefits and to ensure these are high quality investments.”

Hans Anand Beck, lead economist at World Bank Myanmar, echoed Mason’s view.

He recommended transparent processes for licensing and opening to domestic and foreign investment.

“Carefully-managed process of liberalisation, like what we saw in the insurance and telecom sectors here, is critical,” he said.

Beck urged the government to promote domestic investment in practical services, and to remove some of the barriers to companies in trading. He recommended liberalisation in more sectors where the competition could bring down costs.

“For example, logistics service is an important area that should be further liberalised. But, some of the systematic changes that the government is making across the business environment would be helpful to the growth of all sectors,” he said.

Flexible rates

According to Beck, allowing flexibility in interest rates, removing cross-cutting barriers, collecting revenues and delivering basic services such as health, infrastructure and education, are keys to the sustainability of Myanmar’s growth. He pointed out the nation’s low income from taxation, compared to similar economies in the region.

“As the economy is growing, the GDP [gross domestic product] is also growing. Tax is not growing as fast as it should. So, there are many ways the government is reviewing the tax incentives system and looking at the exemption,” he said.

“On the spending side, moving money between spending items and sectors is really important. Myanmar has been moving money towards health and education but should be doing a bit more of that.”

Aside from the basic needs, Myanmar should spend more on the power sector, due to the rising demand for electricity over the next three to five years, Beck said. He urged more flexibility in budget allocation and to consider advancing procurements so that all contracts are ready to go as the budget is implemented.

Beck also called for empowerment and support of small and medium-sized enterprises.

“The government should help connect small and medium-sized enterprises to trade opportunities. Most of them are operating domestically, and their access to finance, skilled labour, and human capital investment is critical,” he said.

“In Myanmar, the government has put in place a range of positive moves. The things that caused downturns have now stabilised again as we have seen the stabilisation of the kyat and reduced inflationary pressures. It helps Myanmar to pick up again,” said the economist.

“Manufacturing and transport services for instance are improving, and telecom is one of them. We do understand that there is an increase in innovations among the telecom operators.

“They are also adding to their investments to ensure better services in a competitive environment. It may be an important contribution to [Myanmar’s] GDP.”

The multilateral lender estimates growth will edge up to 3.9 per cent next year.

Thailand’s growth rate is expected to be lower than regional average as expansion in developing East Asia and the Pacific is projected to soften to 6 per cent in 2019 and 2020, down from 6.3 per cent in 2018, the World Bank said in a report.

The world economy is expected to expand 2.7 and 2.8 per cent for this year and the next, respectively, decelerating from 3 per cent last year.

“Don’t pay much too much attention to Thailand’s slower growth compared with its peers in the Asia-Pacific region. The Thai economy has recovered over the past two years,” said Kiatipon Ariyapruchya, senior country economist for Thailand.

Still, the World Bank expressed concerns over the possibility of further delays in the formation of a new government after the inconclusive outcome of the general election in March, and these doubts might affect investment confidence.

The bank said that the near-term growth projections assume that the government will deliver on its planned public infrastructure projects, with the pace scheduled to accelerate in 2019 and pick up further in 2020 as those related to the Eastern Economic Corridor (EEC) are implemented.

Failure to implement the state-backed projects in a timely fashion or to increase the public investment disbursement rates pose the largest domestic risk to growth, according to the World Bank report, which was released yesterday.

“The political risk surrounding the long-awaited elections recently held on March 24 remains substantial,” the report said.

“The transition to a new government may take longer than expected, potentially affecting the continuity of government programmes and delaying public and private investment decisions.”

The bank warned that the global slowdown would affect the economies of Thailand and its neighbours. The softening growth in East Asia and the Pacific this year and the next largely reflects the global headwinds and a gradual policy-guided slowdown in China, said the report, titled Managing Headwinds, which is the bank’s April 2019 economic update for East Asia and the Pacific.

The World Bank said the region’s economies had weathered the financial-market volatility of 2018 relatively well, largely due to effective policy frameworks and strong fundamentals, including diversified economies, flexible exchange rates and solid policy buffers. Domestic demand remained strong in much of the region, it added.

Andrew Mason, the World Bank’s acting chief economist for the East Asian and Pacific region, warned of downside risks to growth due to further deceleration in advanced economies, the possibility of a faster-than-expected slowdown in China, and unresolved trade tensions.

Mason suggested that in the short term, countries will need to focus on managing global headwinds, including by strengthening buffers.

In the medium term, a renewed focus on structural reforms, including efforts to raise investment and boost human capital will be needed, he said. “To increase resilience to shocks and promote greater economic security, it will be important to continue strengthening social insurance and social assistance,” he said.

While China has been rebalancing its economy, shifting from export-led growth to domestic consumption-led growth, this creates both challenges and opportunities for Thailand and other countries, Mason said.

China is expected to import less intermediate goods in favour of more finished products, he added.

Don Nakornthab, senior director at the Bank of Thailand’s economic and policy department, said that the slowdown in global trade worried him the most. Thailand experienced a contraction of export growth in the first quarter this year, following a slowdown in the latter months of last year, said Don, referring to a 1.64 per cent drop in exports from January to March, compared with the year-earlier period.

“The export decline was more than the Bank of Thailand had expected,” he said. “Usually, it takes about 12 months before Thailand’s exports start to recover. So far, we have not yet reached half way.”

He also shared the World Bank’s concerns over a delay in the establishment of a new government. This may take place in June, but if it is delayed until September, it would affect the investment climate in the public and private sectors and consumer confidence.

He said the government and related agencies were studying the plans and nothing has been concluded, adding that the authorities need to take many factors into account.

The PM also said people with spending capacity should spend, because if people stop spending, everything will ground to a halt, admitting that the government needed to introduce measures that would encourage domestic spending.

In a related matter, the Finance Ministry will reportedly propose economic stimulus measures worth over Bt22 billion on April 30.

Among the measures planned, about Bt 7 billion will be added to the state welfare cards for three specific groups. Of the three, parents will be given Bt500 per child for the purchase of school uniforms, learning tools, textbooks and sportswear; registered farmers will receive Bt1,000 each to buy fertiliser; while 100,000 registered disabled persons will be given an additional Bt200 to Bt300 per month from May to September.

The state already provides subsidies worth Bt600 to Bt800 per month through these cards.

The other two measures will involve tourism.

One project is to promote tourism in secondary cities, aiming to give 10 million people, aged 18 or older, Bt1,500 each to spend in secondary cities.

Those who register for this travel subsidy will first have to use a debit card in a government blue flag shop in any of the 55 secondary cities to prove their identities through an electronic data capture system.

Once their identities are proven, Krungthai Bank will transfer Bt1,500 to their bank accounts for spending. Another tourism promotion measure will be the extension of tax-deduction measures, which ended in December last year.

The measure will offer tax |deduction for spending of not more than Bt15,000 per person in both main and secondary cities nationwide.

The ministry also plans to offer a measure to prop up the property market by offering tax benefits to buyers, while another will be to reduce the tax on books throughout the year. As for business, the ministry will propose a tax deduction of 1.5 to 2 times the expense for shops using the point of sale system as a means to encourage shops to enter the electronic payment system.

Also, in order to promote the future workforce for Thailand’s 10 targeted industries, the ministry will also propose the setting up of a Student Loan Fund to fund students who want to study in these related fields.

The survey covered 1,207 firms from a combined 45 industries nationwide.

This is the third month showing a rise in the confidence index, reflecting increasing domestic consumption after a promotion campaign by producers that boosted production orders in auto, construction, printing and food sectors. Most producers also speeded up production before the long weekend in April this year.

However, most industry owners have continuing concerns about the country’s politics after the election, amid uncertainty over who will form

 the government.

“Most of them need to know when we will have the new government from the election in this period of slower global economic growth, as they also want to know about the policy to drive the country’s economic growth. If we have a

new government as soon as possible, that will boost the country’s economic growth,” Supant said.

With the political uncertainty, the industry confidence index for the next three months, which was forecast in March this year, was down to 104.2 from the 105.4 forecast in February this year. Most industries are concerned about the country’s politics, the dip in the global economy and the trend to increased minimum wages.

Meanwhile, March this year showed record high car production, achieving 198,821 units, which is the highest in 68 months. About 52.23 per cent of total March production, or 103,838 units, were for export, with the remaining 94,983 units or about 47.77 per cent, for the domestic market.

The export volume recorded 117,708 units, the highest in 18 months, up 8.5 per cent, or 103,164 units from the same month last year.

The value of Thailand’s food exports in the first quarter this year was Bt275.119 billion, up 0.47 per cent annually in baht terms, or US$8.708 billion, up 0.92 per cent annually in US dollar terms.

The value last year was Bt1.148 trillion, up 1.43 per cent annually or $35.822 billion, up 7.05 per cent annually, according to yesterday’s release from Federation of Thai Industries.

The country’s food exports since 2015 through last year had risen every year with an average annual growth rate of 3 per cent.