Myanmar’s economy weakened by fighting, inflation hits the poor
BANGKOK — Myanmar’s economy, run by the military, remains fragile as civil unrest, inflation and onerous political decisions compound problems facing farmers and businesses, Bank reports said Thursday. world and other experts.
Conditions have improved since last year, just after the military toppled the elected government of Aung San Suu Kyi, but the country “remains far from a recovery”, said Kim Alan Edwards, senior economist at the World Bank.
“The economy remains really fragile,” he said.
Myanmar is one of many countries in Asia, including Sri Lanka and Laos, whose economies are threatened by soaring prices and weak currencies. A military coup in February 2021, in addition to the pandemic, reversed a decade of reforms and strong economic growth, leaving 40% of the population living in poverty.
“Inequality is estimated to have worsened, with those already poor falling into deeper deprivation,” the World Bank said in its latest update.
Opinions differ on the state of the economy, in part due to a lack of access to up-to-date information following the military takeover.
The World Bank expects the economy to grow at an annual rate of 3% in the fiscal year ending in September, following an 18% contraction the previous year.
Some private sector economists are less optimistic.
In a separate report, Fitch Solutions estimated current year growth at minus 5.5%, falling to 2.5% next year. He said he does not expect the economy to return to pre-pandemic levels for at least six years.
Myanmar has been ruled by the military for most of the past 70 years. The military takeover halted a gradual transition to democratic civilian government and a more modern, open economy and led to a series of sanctions against the military, which controls many industries.
Foreign investment has largely collapsed and many foreign companies have pulled out, including big energy companies like Total SA in France and Telenor in Norway.
Manufacturing has recovered somewhat after many factories were shut down due to coronavirus outbreaks and massive protests against the military after it took over, Edwards said. But workers generally get fewer hours and lower wages.
Banks, meanwhile, are better able to access cash than they were in the first months after the military takeover, he said, but credit is scarce.
The exact state of Myanmar’s foreign exchange reserves is unclear as the latest official data is from late 2020, when it was estimated at around $6-7 billion. We know that about $1 billion has been frozen by US sanctions.
Given the lack of tourism revenue, declining export earnings and soaring costs of oil and gas imports and materials needed for manufacturing, it is “very likely that the reserve situation has deteriorated pretty seriously,” Edwards said.
“There’s not a lot of clarity,” he said, although he said he didn’t believe Myanmar’s reserves had declined to the same extent as those in Sri Lanka, where the he economy collapsed, causing political upheaval, as the country ran out. funds to pay for basic necessities such as food, fuel and medicine.
In an attempt to hold on to valuable hard currency, particularly the US dollar, Myanmar’s central bank has issued several orders requiring companies to deposit these assets in banks and convert them into the local currency, kyats, at well-priced rates. lower than unofficial rates.
Meanwhile, it is Myanmar’s poorest people who are bearing the brunt of the crisis, especially those living in rural areas where armed civil resistance forces are battling the military.
The World Bank report says 20% of all businesses surveyed and 40% of agricultural businesses said conflict was their biggest challenge, disrupting farming and product shipments to markets.
But a 70% jump in the price of fuel and higher costs for fertilizer and transportation are also having consequences, he said.
“When it comes to agriculture, the bottom line is that we don’t think the worst is over,” Edwards said.