“The trade deficit for 2018-19 declined substantially due to higher export volumes and a dip in imports compared to last year,” said U Khin Maung Lwin, assistant secretary at the Ministry of Commerce (MOC).

While some question if the fall in imports is as a result of a slower economy, experts see no cause for concern yet, saying the dip is due to higher volumes of local production and stricter regulations. Meanwhile, they expect exports to rise further, driven by growth and investments.

Total trade volumes for the period between October 1, 2018 and September 30, 2019 were almost $35 billion, with exports valued at $16.9 billion compared to imports of $18 billion. At $1.1 billion, the trade deficit falls short of the government’s target of $500 million.

In comparison, total trade volumes the year before were slightly higher at $35.9 billion, with the trade deficit for that year exceeding $3 billion. Exports totaled $16.4 billion while imports were valued at $19.4 billion.

Exports in fiscal 2018-19 were driven by higher demand for Myanmar-made garments and natural gas produced in the country. Totaling $7.7 billion, the two sectors raked in almost half of total exports for the year.

The agriculture sector also contributed to trade, with just over 2 million tonnes of rice and pulses and over 1.5 million tonnes of maize exported via maritime and border routes in exchange for around $1.6 billion in revenue. However, export revenues from the mining and forestry sectors declined.

Trade deficit

On the face of it, rising exports imply a more stable currency exchange rate and growth for local industries. Since December, the Myanmar kyat has been stable at an average of K1522 per dollar and this has also allowed the central bank to gradually replenish the country’s foreign exchange reserves, the World Bank said.

But declining imports could also mean that the economy is slowing with companies curtailing investments in expansion and consumers spending less on discretionary goods.

Furthermore, Myanmar also bought less steel for construction, machinery for manufacturing and agriculture as well as consumer goods like electronics and medicines, which contributed to the overall decline in imports.

Import volumes, which have risen yearly since 2012, declined in 2018-19. During the period, motor vehicle and fuel imports dipped the most, by almost $1 billion combined, according to the MOC.

“Our new automotive policy restricting imports of right-hand-drive cars and more models being assembled at factories in Myanmar has led to the decrease in vehicle imports,” said U Khin Maung Lwin.

Meanwhile, a drop in diesel imports drove total fuel imports down for the year. U Win Myint, secretary of the Fuel Oil Importers and Distributors Association, said this was due to a 2018 ban on fuel imports by China.

“In the past, at least a third of imported diesel by Myanmar was re-exported to China. This has led to a decline in imports now the practice has been banned,” he said.

U Win Myint added that diesel is mainly used for heavy machineries in agriculture and mining. “Since restrictions have been imposed on the mining sector, the use of such equipment has declined so less diesel is required,” he said.

“Machinery is vital for production. As such, declining machinery imports can affect the rate of production and lead to slower growth and expansion in the country,” said U Myo Myint, chief executive of MKT Construction Co.

However, U Myo Myint noted that this is due to higher levels of domestic production. “The construction sector used to import building materials such as cement in the past. But now that local cement factories have opened, there is less need to import from overseas,” he said.

Another reason imports have been declining is government restrictions on luxury product imports in 2018, according to a recent report by the Asian Development Bank (ADB).

Backed by growth

While trade in fiscal 2019-20 is expected to decline compared to 2018-19, the prospects, buoyed by economic growth and a continuous flow of investments into the country, are still positive, the ADB said.

According to U Thant Sin Lwin, Director General of the Directorate of Investment and Company Administration and Secretary of Myanmar Investment Commission, Myanmar is expected to draw foreign direct investments totaling $5.8 billion in fiscal 2019-20, beginning October 1.

Based on the ADB’s estimates, exports are expected to be worth more than $ 15 billion in 2019-20, while imports should exceed $17 million during the period.

According to the annual World Bank East Asia and Pacific Economic Update, the Myanmar economy is projected to grow by 6.6 percent in 2020, driven by investments in the manufacturing and construction sectors.

That should help Myanmar boost exports further while maintaining a healthy balance of imports. – Translated 

Source: https://www.mmtimes.com/news/declining-imports-trade-deficit-not-cause-concern-experts.html