MYANMAR’S inflation rate averaged nine per cent in 2005, according to figures obtained from the Central Statistics Organisation (CSO), under the Ministry of National Planning and Economic Development.

U Soe Thar, Minister of National Planning and Economic Development and secretary of the Trade Council, told traders earlier this year the inflation rate was beginning to reach double digits.

Although the country’s gross domestic product (GDP) increased 12.2 per cent in 2005 compared to 12 per cent in 2004, the inflation rate last year also increased, the minister said.

“The inflation rate should not be allowed to increase into double digits and we (government and national entrepreneurs) should make an effort to see to it that inflation is no more than five per cent so as not to devalue the Myanmar currency,” U Soe Thar said.

According to statistics released to by the CSO, 2002 inflation rates reached 54 per cent before falling markedly the following year to eight per cent soon after the February 2003 liquidity crisis.

Inflation for 2004 stood at 12 per cent and dropped to nine per cent in 2005, CSO figures show.

Despite an inflation rate of 53 per cent calculated by the United Nation’s Economic and Social Commission for Asia and the Pacific (ESCAP) for the 2005-06 financial year – that is, prior to the civil servants’ pay increase – official figures showed inflation to be only 10 per cent for the same period.

A senior official from the Ministry of Finance and Revenue told The Myanmar Times last week that the method of calculation to determine inflation rates differs from one country to another.

He said unlike the calculations from outside organisations, such as ESCAP, the Myanmar government’s is “based on the actual consumer price index”, and other information obtained within the country.

“So, the results of calculations can be very different depending on what information is available and what method is used,” he said.

Dr Alfred Oehlers, an associate professor at the Auckland University of Technology in New Zealand, said Vietnam had experienced inflation levels up 800 per cent before its economic reform.

Now Vietnam’s inflation rate stood at less than five per cent because of the country’s rapid economic growth, Dr Oehlers said.

At the Union of Myanmar Federation of Chamber of Commerce and Industry (UMFCCI) annual general meeting last year Prime Minister General Soe Win said Myanmar experienced an inflation rate as low as 3.8 per cent in early 2004.

A renowned Myanmar economist said a major cause of the sharp fall in inflation from 54 per cent in 2002 to eight per cent in 2003 was the reduced money supply resulting from the liquidity crisis.

A senior officer from one of the country’s private banks, who did not want to be named, said a dramatic drop in car and real estate speculation also contributed to the decline.

U Khin Maung Lin, president of the Hanthawaddy Car Trading Disciplinary and Supervisory Committee, told The Myanmar Times that prior to February 2003 cars were much more expensive than they are today.

“Now that the government has controlled private banks since February 2003, bank loans are hard to come by and private financial institutions can’t give unlimited loans to their customers like they did before.

“Since that time, the price of cars has fallen rapidly to half what it was. Brokers can’t manipulate the car market and speculate as they did before. Accordingly, the prices have gone down,” he said.

The banker said Myanmar’s economy did not operate like those of developed countries.

“Myanmar is known as a cash economy because the majority of transactions in commercial trade here are done in cash rather than cheque or credit card, which is how banking economies like those in developed countries work,” he said.

An economist from the Yangon Institute of Economics added that a bond market like those of more advanced economies would help to lower inflation.
According to the International Monetary Fund (IMF), Myanmar’s inflation rate averaged 33.4 per cent during the four years from 2000 to 2003.