At a press conference on Wednesday, Winfried Wicklein, ADB country director for Myanmar, lauded the economic and social reforms undertaken in the last four years. However, he said Myanmar’s new government will face the challenges of advancing the economic reforms, addressing infrastructure and labour shortages, and making progress towards peace and social cohesion.

“It is very, very important for the country to grow rapidly. But you need to create access for 70 per cent of the population living in rural areas to market, opportunities and basic services like hospitals and schools, etc. Disaster risk management, education and technical training are really important. Intensified efforts are needed to connect and develop rural areas to improve access to markets and services, and to generate opportunities and jobs. Fast growth is important. At the same time, it is necessary to raise the income of families in rural areas. You have to make sure nobody is left behind,” he said.

In the Asian Development Outlook (ADO) 2016, Myanmar is set to lead all Asean nations in terms of growth rate in 2016 and 2017, with growth forecasts of 8.4 and 8.3 per cent for the two fiscal years. In fiscal 2015, the growth rate was estimated at 7.2 per cent.

Elsewhere in the region, Cambodia is close behind with 7 per cent growth forecast, Laos (6.8 per cent), Vietnam (6.7 per cent), the Philippines (6 per cent). These top 5 countries will be followed by Indonesia (5.2 per cent), Malaysia (4.2 per cent), Thailand (3 per cent), Singapore (2 per cent) and Brunei Darussalam (1 per cent). The outlook is bright, according to Wicklein, who looks forward to supporting the new government in achieving Myanmar’s development goals.

A successful political transition is expected to give a boost to foreign direct investment.

However, while inflation would remain as high as 9.5 per cent in the 2016 fiscal year ending March 31, 2017, thin foreign reserves and fiscal buffers could pose risks to the economic outlook, according to ADB deputy country director Peter Brimble.

Other risk factors are the capacity of the government to maintain reform momentum, ethnic and sectarian tensions, and vulnerability to bad weather.

Infrastructure as “core” area

The ADO 2016 underscores the importance of Myanmar’s transport infrastructure after decades of under-investment. ADB estimates that US$60 billion (Bt2.1 trillion) will be needed through 2030 to improve transport infrastructure. This requires the government to raise its transport investments to 3-4 per cent of gross domestic product, from a little more than 1 per cent in recent years.

Brimble said that 60 per cent of Myanmar’s trunk road network needs urgent repair, while public transport remains very inadequate. He welcomed the incoming government’s decision to form a unitary transport ministry and create a new national transport master plan.

“Given the immense funding required, private sector resources could be mobilised through the restructuring of concessions to operate toll roads, competitive outsourcing of civil works, and privatisation of state-owned enterprises,” he said.

Wicklein noted that Myanmar would need approximately $120 billion by 2030 to improve its infrastructure as a whole, including $40 billion in electricity-generation capacity, transmission and distribution. Another $20 billion is expected for the telecom sector and urban infrastructure.

 

The central bank’s economic summary for January showed that manufacturing production contracted in several categories due to sluggish merchandise exports.

In the month, export value contracted 9.3 per cent from the same period last year, the central bank said. It is worse than the Commerce Ministry’s data, which is based on customs data, that showed 8.91 per cent contraction.

Three main reasons were attributed to the export decline: an economic slowdown in China andAsean countries; a phase out in short-term supportive

factors such as a deceleration in exports of new models of commercial cars and a slowdown in exports of optical appliance and instruments owing to a decline in the global demand for electronics; and a continued decline in export prices of petroleum-related products.

Private investment indicators remained subdued in line with sufficient capacity utilisation and positive attributes from the acceleration in commercial car purchases started to level off. At the same time, investment in alternative energy and telecommunication slightly decelerated. Meanwhile, overall corporate financing stabilised, largely contributed by an increase in corporate debt issuances.

Private consumption also decelerated slightly after temporary factors waned off, particularly the acceleration in car purchases and household expenditure at the end of last year. In addition, the unusually cold temperature during the month of January led to a slight decrease in household electricity consumption. At the same time, an incremental decline in consumer confidence, due partly to concerns

over the drought situation and the global economic slowdown, has provided less support to consumption momentum. Nonetheless, stabilised non-farm income helped support the expansion of spending on nondurable goods and services.

Tourism and public spending continued to boost the economy in January.

The number of foreign tourists increased by 15 per cent on year, in line with the a continued increase in Chinese tourists as well as a pickup in tourist arrivals from Europe.

“Tourism sector continued to improve and remained the main driver of related service sector, especially wholesale and retail trade as well as logistics,” the central bank said.

On public spending, the central bank said that it continued to be well disbursed although overall performance decelerated somewhat due to a slight deceleration in non-budget disbursement, particularly on transportation and irrigation projects, after a rapid acceleration in the previous month.

On the stability front, a decrease in energy price was highlighted as a key factor that headline inflation remained negative at 0.53 per cent. The service sector in the month also helped boosted employment.

Meanwhile, Thailand’s current account surplus in the month hit US$4.1 billion, due partly to foreign direct investment in manufacturing and service sectors. Foreign inflows to the Thai debt market, driven by the US Federal Reserve’s signal of delays to further policy rate hikes as well as Bank of Japan’s easing, also boosted the surplus.

Government attempts to boost their economies with monetary loosening could be “counterproductive”, finance minister Wolfgang Schaeuble told a conference ahead of a G20 finance ministers meeting in Shanghai.

Central bankers have come under pressure ahead of the gathering of the world’s top economies to unleash fresh monetary firepower to help stimulate sagging growth and reassure investors.

Japan has already adopted negative interest rates, the European Central Bank has embarked on a huge quantitative easing programme, and the US Federal Reserve has signalled possible delays to interest rate rises.

But Schaeuble said that reforms were more important and “thinking about further stimulus just distracts from the real task at hand”.

Berlin does “not agree on a G20 fiscal stimulus package”, he added.

“Monetary policy is extremely accommodating to the point that it may even be counterproductive in terms of negative side effects,” he said.

“Fiscal as well as monetary policies have reached their limits, if you want the real economy to grow there are no shortcuts without reforms.”

As the European Union’s largest and richest country, Germany often has different economic priorities than other members.

Speaking at the same conference as Schaeuble, Bank of England governor Mark Carney retorted: “Several commentators are peddling the myth that monetary policy is out of ammunition.”

The world “risks being trapped in a low growth, low inflation, and low interest rate equilibrium”, he said, adding that monetary stimulus “can buy time for structural adjustments” and the challenges “demand that our firepower is well aimed”.

Similarly, US Treasury Secretary Jacob Lew said earlier this week that fiscal and monetary policy were “important tools”.

“When used together, they’re powerful. And that’s the message we bring,” he told Bloomberg Television.

“It means that in countries that are big economies, regions that have big economies, they need to use policy tools.”

Last week the 34-member Organisation for Economic Cooperation and Development cut its 2016 global growth forecast from 3.3 per cent to 3.0 per cent.

OECD official Alain de Serres said in Shanghai that monetary policy measures could “save time” but more measures were also needed to boost demand.

“Part of it is fiscal policy but in most cases structural reform can help with demand,” he said.

’Walking dead’

Schaeuble, known for being frank, has previously openly criticised the ECB for being too accommodative.

The use of spending over the last two decades to mitigate against economic crisis no longer appeared to work, he said Friday, adding that debt levels were too high while growth remained too low.

“The debt-financed growth model has reached its limits,” he said. “If we continue on this path we no longer need to watch television, the walking dead will overwhelm us, particularly in finance and construction.”

He did not specify in which countries such zombie enterprises existed — although they are a perennial issue in China.

The holder of this year’s G20 presidency is China, the world’s second-largest economy, but its slowing growth has roiled global markets and sent prices of some commodities such as base metals plunging, leaving producer countries facing a bleak outlook.

The world’s biggest trader in goods, China’s growth fell to 6.9 per cent in 2015 — high compared to most other G20 members but the worst in a quarter of a century and a far cry from the fat years of double-digit increases.

A shock currency devaluation in August followed by another drop in January raised suspicions Beijing was pursuing a currency war to make its exports cheaper — at others’ expense, and a stock market slump has also raised alarms.

Beijing has more room to boost the economy, the governor of the central People’s Bank of China said Friday as he sought to reassure markets.

“China still has some monetary policy space and monetary policy tools to address potential downside risk,” Zhou Xiaochuan said in a possible signal of more interest rate cuts and reductions in the amount banks must keep in reserve.

“We will not resort to competitive devaluations to boost our advantage in exports,” he added.

– AFP

KSAM, which claims to be one of the top five Thai fund-management firms in terms of asset size, has suggested to investors an asset-allocation strategy to tackle capital-market volatility as a result of several risk factors, said Siriporn Sinacharoen, newly appointed managing director of the company.

“The drought will cause lower output among farmers and also a decline in their spending power, which might accordingly affect the country’s economic growth,” said KSAM’s acting chief investment officer, Supaporn Leenabanchong.

Meanwhile, China is in a transitional period of economic restructuring from a consumer economy to an exporter and investor, resulting in a slowdown in its growth, she said.

The economic giant’s GDP growth for this year is expected to come in at around 6 per cent, compared to double-digit expansion in the past, she added.

However, Siriporn said KSAM had set a target for this year’s assets under management (AUM) at Bt373 billion – 15-per-cent growth from the end of 2015 – and customer-base growth of 14 per cent via the Bank of Ayudhya (Krungsri) network of more than 630 branches.

“We will focus on new products based on both asset allocation and geography for more choices of investments, in line with economic situations and consistent returns in the long term,” she said.

She added that KSAM would also educate investors about how to invest for the long term in order to achieve their targeted returns and satisfy risk appetites.

Last year, KSAM posted 15-per-cent growth in AUM to Bt320 billion, comfortably beating the industry average of 8 per cent.

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The company’s number of customers grew by 20 per cent during the course of the year.

“Foreign investment funds were KSAM’s outstanding funds last year, with AUM growth of 220 per cent, while the equity fund KFSDIV recorded the largest inflow [compared to other stock funds in the industry] for a third consecutive year,” the managing director said.

As for Thai GDP growth this year, Supaporn said KSAM expected the rate would be 3.2 per cent due to the country’s economic recovery – driven by stimulus measures, a clearer picture of the government’s policy on investment of infrastructures, and the booming tourism sector.

“KSAM is still optimistic about investment in the Thai stock market in the long term, though there will be volatility in the short term,” she said, adding that the company believed that listed companies’ performance would recover this year.

The acting chief investment officer said KSAM expected overall listed companies’ |earnings growth this year |would be around 10 per cent, while the firm believed the |Thai stock market was still attractive among Asean| bourses.

Investors are also recommended to overweigh in equities, especially selective and growth stocks in both Thai and foreign capital markets, particularly in Europe and Japan.

As for debt instruments, investors should pick Thai debts rather than foreign debts, due to monetary-policy uncertainty, she explained.

The package, announced by the finance ministry, came as Asia’s fourth-largest economy in Asia saw its exports plunge 18.5 per cent on-year in January — the sharpest decline for more than six years.

Exports account for more than 50 per cent of the country’s GDP, according to the World Bank.

“The government will mobilise all available means and resources in order to boost domestic consumption and exports in the first quarter to March and to help create new jobs,” the ministry said in a press statement.

It will front-load government budgets and policy loans to businesses during the three-month period, injecting an additional 21.5 trillion won ($17.4 billion).

Public spending for the first quarter will be increased by six trillion won to 144 trillion won and lending by policy banks will be jacked up by 15.5 trillion won to 115.9 trillion won.

It will also extend until June a programme to cut consumption tax on passenger cars, which was set to finish at the end of December.

Domestic auto sales plunged 40 per cent last month after South Korea rolled back a 1.5 per centage point cut in auto consumption tax.

“We expect the increased front-loading to push up growth by 0.2 per centage points in the first quarter”, Deputy Finance Minister Lee Chan-Woo was quoted as saying by Yonhap news agency on Tuesday.

“We have to keep the momentum alive in the first quarter so that the economy continues moving on in the following quarters”, he said.

The Bank of Korea last month revised its GDP growth forecast down from 3.2 per cent to 3.0 per cent for this year, citing factors like the signs of a slowdown in China — the South’s biggest export market.

Last year, the South’s economy grew at its slowest pace since 2012 as exports faltered in the face of a global slowdown and rock-bottom oil prices.

Exports for the whole of 2015 fell 8.0 per cent — the first contraction for three years.

– AFP

In the wide-ranging interview published in the El Mundo daily, Luis de Guindos warned that a government composed of the long-established Socialist party (PSOE) and upstart Podemos would generate a lot of “uncertainty.”

Spain has been in political limbo since December elections saw the outgoing, conservative Popular Party (PP) win but without an absolute majority, leaving Prime Minister Mariano Rajoy struggling to form a government due to lack of support from other groupings.

On Friday, he abandoned attempts to form an administration, while Podemos leader Pablo Iglesias — which came third in the elections — proposed establishing a government with the Socialists, making a left-wing governing alliance more likely.

Such a coalition “would be seen as an unstable government, as Podemos and the PSOE are competing for the same electoral space,” De Guindos said in the interview.

When asked whether the markets were more afraid of anti-austerity Podemos or of the resurgent secessionist threat in Spain’s northeastern region of Catalonia, he responded that an “unstable government” was more worrying.

“There is concern that reforms will be reversed, that the public deficit won’t be addressed, that competitivity will be lost,” he was quoted as saying.

After he came to power in 2011 at a time of deep crisis in Spain, Rajoy implemented drastic spending cuts and tax rises to try to steer the country away from economic collapse.

Spain has now started to recover, but the Socialists and Podemos argue this has been at the expense of social welfare as inequalities have risen drastically.

Anti-poverty agency Oxfam warned last week that out of the OECD group of most advanced or emerging economies, Spain was the nation where inequalities had risen the second-most — far more than even crisis-hit Greece or Mexico.

– AFP