Economic developments
- The economy grew at an estimated 8.5% in fiscal year 2014/2015, with economic reforms supporting consumer and investor confidence.
- The service sector was the main driver of growth thanks to expansion in telecommunications and transportation.
- Agricultural output picked up in fiscal year 2014/2015 after two years of sluggish growth, whereas manufacturing and industry outputs (particularly gas) have also been strong.
- The floods in July 2015 are likely to affect the main rice crop this year, though an assessment of the full extent of the economic impact is underway.
- The general government budget deficit for fiscal year 2014/2015 amounted to roughly 4% of GDP.
- Inflation has been rising, reaching nearly 10% in the 12 months to July 2015.
- Between January and August 2015, the exchange rate depreciated by around 20% due to a stronger US Dollar, a growing current account deficit and slowing foreign investment inflows.
Economic outlook
- Growth is expected to moderate to 6.5% in fiscal year 2015/2016 though this is subject to revision as more is known about the impact of recent floods.
- Inflation is projected to increase to 11.3% in 2015/2016 due to supply pressures caused by the floods and currency depreciation.
- The current account will come under pressure due to import demand for post-flood rehabilitation and slowing agricultural exports.
- While medium-term growth remains strong, addressing the impact of the floods on households that are relatively worse off is a challenge.
Policy watch
- Addressing short-term macroeconomic challenges will require continued efforts to maintain exchange rate flexibility as well as monetary and fiscal policy discipline.
- Strong growth will depend, among other things, on continued progress in macro-structural reforms such as strengthening the business environment, modernizing the banking sector, and strengthening public debt management.
- Efforts to improve access to financial services is a priority for private sector growth and poorer households.