Vendors selling fruit and vegetables at a market in Kalaw, Myanmar.
Myanmar is expected to suffer a second straight year of economic contraction as global financial turmoil converges with political and economic turmoil triggered by the February 2021 coup, according to a leading risk assessment agency.
In its latest Myanmar outlook, released yesterday, Fitch Solutions, a division of Fitch Group, projected the country’s economy would contract 5.5 percent in the current fiscal year, which ends in September.
The negative growth projection reflects the impact of the post-coup conflict, compounded by the impact of “high global commodity prices and domestic inflation,” Fitch said in its report.
While this represents something of an improvement on the barely credible 17.9 percent contraction Myanmar experienced in fiscal year 2020-21, Fitch did not forecast an immediate end to the country’s economic woes.
“Our forecasts imply that economic conditions will remain extremely difficult in Myanmar in the coming months,” the report states. “We don’t expect the economic output lost during the pandemic to recover until at least FY28.”
The projection speaks to the extent of the disorder caused by the military’s seizure of power in February 2021. In the nearly 18 months since then, security forces have murdered about 2,100 people, according to the Association for Assistance to Political Prisoners, which has a cumulative total of deaths and detainees since the coup. The United Nations refugee agency reported this week that the number of displaced people in Myanmar has exceeded 1.1 millionof which an estimated 769,400 have been displaced since the coup.
The conflict also shows little sign of ending, with the military junta now facing a determined coalition of opponents, including the National Unity Government (NUG), a kind of internal government-in-exile made up of members of the ousted civilian government and its allies. , People’s Defense Forces loosely aligned with the NUG, and ethnic armed groups that have been fighting for autonomy for decades.
The flip side of this political turmoil is near-economic collapse. As Western nations have imposed economic sanctions and international investors have withdrawn from the countryMyanmar has seen a sharp rise in unemployment and a collapse in value of the kyat currency. Meanwhile, the conflict has destroyed vital infrastructure and impeded daily economic activity in many regions of the country, including parts of central Myanmar that had previously been largely free of conflict. The World Bank, which is scheduled to release its own Myanmar Outlook tomorrow, Estimate last year’s economic contraction by 18 percent.
Fitch predicted that the unresolved political crisis would continue to weigh heavily on the country’s economic prospects, and vice versa. “Economic difficulties will increase the scope of social unrest and encourage more people to take up arms against the junta,” he stated. “This is likely to cause further damage to infrastructure and impair the normal operation of business activities, partially mitigating any potential positive growth momentum from an easing of COVID-19 restrictions in 2022.”
The group said it forecast real GDP growth to return to positive growth of 2.5 percent in fiscal 2023, as global commodity prices and inflation begin to ease, “reducing some of the pressure on the real disposable income of households”. But given the low statistical base, he described this projected recovery as “meager.”
“The growth rates we forecast for 2023 will be totally insufficient to lead to a significant improvement in the living conditions and the poverty situation in the country, where around half of the population lives in absolute poverty,” he said.