RAM Ratings assigns gB3(pi) global scale ratings to Myanmar

Published on 28 April 2015

RAM Ratings has assigned a gB3(pi) global-scale sovereign rating to Myanmar, with a stable outlook. On the ASEAN scale, Myanmar has been assigned a seaB1(pi)/stable rating. The ratings reflect Myanmar’s sizeable development gap and its limited regulatory capacity to support growth. These factors are, however, moderated by the country’s vast economic potential and ongoing economic reforms.

Myanmar is a low-income economy with abundant natural resources. Its isolationist policies in past decades had hindered its development. Myanmar’s growth trend is volatile as it is susceptible to various shocks due to its various structural characteristics. These vulnerabilities stems from an economy which is highly dependent on the agriculture sector, a sizable development gap as evidenced by the fact that it is the lowest ranked Southeast Asian country in the UN’s human development indicators and a relatively low domestic savings rate at 18.6% of GDP (ASEAN average: 29.5%).

Separately, economic reforms since 2011, which have relaxed regulations on foreign participation in the economy, as well as the easing of trade and financial sanctions imposed on the country will benefit its resource-driven industries.  “The main constraint to Myanmar’s vast economic potential is its weak institutional framework. Improvements in that regard will increase Myanmar’s long-term growth sustainability,” notes Esther Lai, RAM’s Head of Sovereign Ratings.

There are several constraints to Myanmar’s government finances. On the revenue front, earnings from State Economic Enterprises – typically large state-owned conglomerates which operate in monopolistic conditions and are key generators of fiscal earnings – are expected to decline gradually as the economy liberalises and foreign participation in protected industries increases. Similarly, Myanmar’s substantial and current development needs are expected to restrict its fiscal space over the medium term. These factors are exacerbated by a lack of domestic capital market development that constrains the Government’s funding flexibility.

Myanmar’s ratings will be revised upwards if there is a material improvement in the country’s regulatory capacity and business environment, such that it gives rise to investment-led economic growth. The ratings will face downward pressure in the event of a sustained devolution of the country’s current economic conditions, particularly if there is significant evidence of backtracking on reforms.

Media contact
Jason Fong
(603) 7628 1103
jason@ram.com.my