Nepal

AGRICULTURE is the mainstay of the Nepalese economy, providing a livelihood for three-fourths of the population and accounting for a little over one-third of GDP. Industrial activity mainly involves processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. The country is heavily dependent on trade with neighbouring India.

The government is focusing on three areas for investment — agriculture, tourism and energy. The country has the potential in all the three areas due to its unique topography and abundant natural resources.

Meanwhile, according to UN estimates, about 40pc of the population lives in poverty. The Institute of Development Studies reports that at least 2.2 million Nepalese, or nearly 10pc of the population work abroad. Remittances account for nearly 26pc of GDP.

And local unemployment remains a major problem. Official statistics put the unemployment rate at 2.2pc, but private estimates put it as far high as 46pc.

According to the ADB Outlook 2014, the country’s economy grew by 3.6pc in the fiscal ended July 2013), slowing from 4.5pc a year earlier. GDP is now expected to grow by 4.5pc in 2013-14 and 4.7pc in 2014-15.

The IMF recently predicted that economic growth would remain below 3.8pc due to low capital expenditure, bad weather and slowing Indian economy. As per the mid-term review of the budget for this fiscal year, the government has slashed its economic growth forecast from 5.1pc to 4.1pc.

Meanwhile, the Nepal Rastra Bank has targeted to keep inflation at 8.5 pc this year. The country’s inflation rate is often said to be determined by prices prevailing in India, adjusted for the exchange rate. The Nepali rupee is pegged to the Indian currency, while the exchange rate with other currencies is fixed by taking into account the exchange rate of Indian currency.

The increase in the number of migrants to the Gulf is expected to accelerate remittance growth in FY14. The balance of payments is expected to remain strong due to increased remittances and higher income from tourism.

The tourism sector is a key contributor to the country’s economic growth. It is also the second biggest foreign income earner after remittances. The country attracted nearly 600,000 foreign tourists in 2012, a 10-pc rise over the previous year. Last year, the tourism sector earned $370m in revenue.

But a recent World Bank report says Nepal needs to invest from 6.6pc to 9.9pc of GDP in transportation, energy, telecommunication, irrigation, sanitation and drinking water every year. The government has allotted $904 million for developing infrastructure for the current fiscal year.

Myanmar

THE Burmese government has initiated notable economic reforms, including steps to ensure the independence of the central bank, providing budget allocation for social services, and enacting laws to protect intellectual and real property. But it is yet to embark upon broad-based macroeconomic reforms.

The most productive sectors will continue to be in extractive industries — especially oil and gas, mining, and timber.

According to the ADB Outlook 2014, GDP growth accelerated to an estimated 7.5pc in FY13 from a revised 7.3pc in FY12. The economy is forecasted to post higher growth of 7.8pc in FY15, benefiting from rising investment and improved business confidence, since the government started to invigorate and open the economy three years ago. The government is aiming for 9.1pc growth in 2014-15

The government has initiated a broad range of reforms: unifying the exchange rate, improving monetary policy, increasing tax collection, reorienting public expenditure toward social and physical infrastructure, improving the business and investment climate, developing the financial sector, and liberalising agriculture and trade.

According to an IMF staff team led by Mr Matt Davies that visited Myanmar in January, Myanmar’s current economic outlook is favourable. Real GDP growth is expected to rise to 7.75pc in 2014-15. According to Akrur Barua, an economist and a manager at Deloitte Research, the Burmese economy is set to accelerate in the medium term, boosted by growth in investments, especially foreign inflows.

The country’s central bank is targeting inflation at around 7-9pc in the next five fiscal years, with strong upside risks. However, as infrastructure develops and economic management improves, inflation is likely to come down. The Asian Development Bank recently predicted that inflation was 5.8pc in 2013-14, and would accelerate to 6.6pc and 6.9pc in 2014-15 and 2015-16, respectively.

Factors contributing to rising prices include a boost to public sector wages, higher electricity tariffs, and rising property prices in cities. The IMF expects inflation to reach 7pc this year, fueled by electricity prices and demand pressures.

The country also needs to address a burning issue of poverty, with an estimated 32pc of the population living below the poverty line, according to experts.

The Myanmar Investment Commission expects foreign direct investment in Burma to reach between $4 billion to $5 billion in 2014-15. An estimated $3.5 billion was invested in 2013-14, as compared to $300 million in 2011-12 and $1.3 billion a year later.

One of the most lucrative sectors for FDI is oil and gas. The country has 50 million barrels of known crude oil reserves, while the corresponding figure for gas is 280 billion cubic metres, which could rise further as offshore exploration starts.

The IMF is of the opinion that the government has so far maintained momentum on policy reform. The reform agenda depends on strengthening institutions and capacity development at all levels of government. It requires concerted efforts to reform and develop electricity supply.

Aided by strong reforms, the country looks set to benefit from its hydrocarbon resources and strategic location between two emerging economy giants — China and India.