The global COVID-19 pandemic is dealing a severe blow to Myanmar’s economy. Economic growth in a baseline scenario is projected to drop from 6.8 percent in FY18/19 to just 0.5 percent in FY2019/20, according to the World Bank’s Myanmar Economic Monitor, released yesterday.
If the pandemic is protracted, the economy could contract by as much as 2.5 percent in FY2019/20, with the expected recovery in 2020/21 subject to further downside risks.
The slowing economic growth threatens to partially reverse Myanmar’s recent progress in poverty reduction while reducing the incomes of households that are already poor. Under the baseline scenario, in which the domestic spread of the coronavirus is brought under control, the global economy swiftly recovers, and Myanmar’s GDP growth rate is projected to bounce back to 7.2 percent in FY2020/21, poverty rates would increase in the short term and will not return to pre-crisis levels until FY2021/22. Under the downside scenario, poverty rates would remain above their pre-crisis level until at least FY2022/23.
The report also looks at the Myanmar government’s response to the crisis through the COVID-19 fund and Economic Relief Plan (CERP), which includes measures to offer relief and initiate a resilient recovery - including tax relief, credit for businesses, food and cash to households, as well as policies to facilitate trade and investment.
“At the moment the medium-term outlook for Myanmar’s economy is positive, but there are significant downside risks due to the unpredictable evolution of the pandemic. Robust policy actions are urgently needed. It will be important for the government to boost the effectiveness of the CERP by ensuring flexibility in spending targets, extending support to smaller enterprises and ensuring all poor households can benefit from the plan,” said Mariam Sherman, World Bank Country Director for Myanmar, Cambodia and Lao PDR.
The report highlights that the effects of the crisis are not being evenly felt across sectors. Industrial production is expected to contract by 0.2 percent in FY2019/20 as lockdown measures restrict access to labor, the closure of the overland border with China disrupts the supply of industrial inputs, and consumer demand—both domestic and international—remains soft. Precautionary behavior and travel bans continue to negatively impact wholesale and retail trade, tourism-related services, and transportation. Due to the ongoing disruption of supply chains and weakening external demand, exports are expected to remain weak over the rest of the fiscal year. Tax revenues are projected to decline by 6.0 percent, year-on-year, in FY2019/20.
Meanwhile the agriculture sector has so far proven to be more resilient, and the Information and Communications Technology (ICT) sector is experiencing a surge of activity driven by a sharp increase in telecommuting and e-commerce. Falling consumer demand under COVID-19 is moderating inflation.
The Myanmar Economic Monitor is a biannual analysis of economic developments, economic prospects and policy priorities in Myanmar. The publication draws on available data reported by the Government of Myanmar and additional information collected as part of the World Bank Group’s regular economic monitoring and policy dialogue.