Construction Boom Not A Guarantee
BMI View: We continue to believe that near-term construction growth in Myanmar will remain close to the modest levels seen in 2012. This lack of acceleration in growth is due to the limited upside to foreign investment - the main driver of construction activity - and the numerous threats to the country's political environment before and during the 2015 general elections. That said, our base scenario is for broad political stability to persist in Myanmar and reforms in the country's business environment to continue. Should that be the case, we believe that the growth prospects for Myanmar's construction sector beyond 2015 are bright, due primarily to the country starting from a low economic base.
It is still our opinion that near-term growth for the Myanmar construction sector could remain at levels close to 2012. We are forecasting real growth for the sector to reach 9.4% in 2013 and 9.7% in 2014. This relatively robust growth rates are primarily because the country continues to posses strong fundamentals for construction activity. Not only is Myanmar offering significant project opportunities due to its severe shortage in buildings and infrastructure, but the country is also willing to continue carrying out sweeping economic reforms to improve its business environment for investors. The Myanmar government recently launched the country's first construction and housing development bank (the bank's remit is to provide loans for local home purchases and construction), with other reforms set to take place in 2014 - namely an online platform for construction permit application and the privatisation of some state-owned railway lines in and around Yangon.
However, we believe that the Myanmar construction sector is unlikely to maximise its growth potential and achieve double-digit growth rates. In fact, it is our opinion that the sector could see a dip in growth in 2015, falling to 8.5%. This is primarily due to two factors:
|Drastic Increase Not Repeated|
|Myanmar - Yearly FDI Inflows, US$mn|