Via Two Circles, an article on Myanmar’s economic potential:

Myanmar’s economy looks set for rapid expansion although concerns over inflation, infrastructure and political stability remain, according to an international report.

The Economist Intelligence Unit (EIU), a leading resource for economic and business research, has predicted in its latest report on Myanmar this week that the national economy will expand by 5.2 percent in 2012-13, while inflation will rise to six percent.

The influential British group also said that imports will rise as foreign firms flood into the country in the wake of easing international trade sanctions. Exports will follow suit as production capacity increases on the back of this extra investment.

“Relatively strong regional demand for Myanmar’s largest exports — natural gas and gems — will underpin export revenue in 2012,” The Irrawaddy newspaper quoted the report as saying.

“Revenue from sales of natural gas is expected to rise sharply in 2013 when new fields come on stream. Revenue from other important exports, such as pulses and timber, with also strengthen in line with greater regional demand.”

The EIU predicts that the end to Western sanctions will see trade links expand beyond Asia, leading to export revenues to increase to around 12 percent in 2014-16.

However, there is a note of caution over fears of a backlash from government hardliners after opposition leader Aung San Suu Kyi’s National League for Democracy (NLD) party swept the April 1 by-elections, winning 43 of the 45 parliamentary seats it contested.

“The challenge now is how the administration will work with the small but growing democratic opposition in parliament,” the report said.

“The government is all too aware that it faces another national election in 2015. The recent by-election results suggest that on a level playing field the USDP (the ruling party) would all but disappear as a political force, leaving the NLD in control of parliament – albeit with 25 percent of seats still set aside for the military.”

Although an expected decline in global food prices means that Myanmar’s import inflation will remain low this year, a January rise in petrol prices of 30 percent, coupled with a hike in electricity costs of 40 percent in late 2011, will likely keep inflation at around 5.7 percent in 2012.

“Increased investment, which will boost imports, will have a negative impact on the trade account, but the positive effect of higher investment flows on the capital account will outweigh this, resulting in an overall gradual appreciation of the local currency,” the EIC said.