Economic studies
Myanmar

Myanmar

Population 53.6 million
GDP per capita 1,217 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) 3.2 -17.9 2.0 3.3
Inflation (yearly average, %) 5.7 3.6 16.2 13.3
Budget balance (% GDP) -5.6 -7.8 -7.8 -7.2
Current account balance (% GDP) -3.4 -1.4 1.7 -1.3
Public debt (% GDP) 39.3 62.3 62.5 63.7

(e): Estimate (f): Forecast *Fiscal year 2023: 1 October 2022 - 30 September 2023

STRENGTHS

  • Abundant commodities (minerals including jade, ruby, copper, gold, gas and oil), hydroelectricity opportunities
  • Young population (25% of the population is under 14)
  • Proximity to dynamic economies (India, China, Thailand)
  • High potential of the primary sector (agriculture)
  • Huge potential for tourism
  • Availability of low-cost labour
  • Member of ASEAN

WEAKNESSES

  • The coup d'état has isolated the country and its economy, notably with sanctions from the West (asset freezes and prohibition of transactions with military-run companies) and withholding of international assistance
  • Corruption is highly endemic and the business environment is poor
  • Large ethnic diversities (135 ethnic groups in the country) and problems related to the lack of tolerance towards the Rohingya Muslim minority by the Buddhist majority, but also towards Buddhist minorities who have armed groups.
  • Blacklisted by the Financial Action Task Force for terrorism and the financing of crime
  • Inefficient central bank, submits to the government
  • Lack of diversification and infrastructure (electricity, refining, education, healthcare)
  • Underdeveloped financial sector
  • Country highly exposed to natural disasters (earthquakes, cyclones, floods, etc.)

RISK ASSESSMENT

An increasingly isolated country

After alleging fraud in the 2020 legislative elections, which was denied by all international observers, the military seized power in February 2021. The junta ousted Aung San Suu Kyi's National League for Democracy (NLD) party, which had won the elections. Because of constitutional rules making her unable to be president, Aung San Suu Kyi, leader of NDL and winner of the Nobel Peace Prize, was until then state advisor. President Win Myint, elected in 2018 by a college comprising members of the legislatives chambers and the military, was the first president not to be part of the military in more than five decades. After the coup, he was replaced by a military loyalist. Detained since the takeover directed by General Min Aung Hlaing, the military junta convicted Aung San Suu Kyi of multiple charges, with the final trial in January 2023 lengthening her sentence to 33 years in jail. The military takeover has led to major protests, with 12,000 people estimated to have been imprisoned and 2,000 to have been killed. In the summer of 2022, the military executed four prominent pro-democracy activists, the first use of capital punishment in decades.
This late event, which drew criticism from the international community, further isolated the country. Following the coup, the Biden administration and the European Union announced sanctions. In December 2021, the United Nations postponed its decision on the country's representation, as most countries did not recognise the new leadership. The political crisis is also affecting the relationship with ASEAN. Although the latter did suspend the country from the association, it announced in August 2022 that it had barred Myanmar's ruling generals from group meetings. The country’s strong relationship with Russia since the latter’s invasion in Ukraine has alienated Myanmar from the West even more. In addition to being the junta’s main supplier of arms, Russia also represents a source of discounted fuels.

 

Economy at a standstill since the coup

After a sharp contraction in the economy in fiscal year (FY) 2021 due to the coup d’état and the pandemic, GDP will continue to recover slowly in FY2023. On the one hand, the negative effects of the military coup on the economy, notably through increasing conflicts between the junta and armed resistance groups, as well as international sanctions, are expected to persist. On the other hand, the economic difficulties that emerged following the war in Ukraine will likely remain. Inflation will decelerate but should remain well higher than in past years, constraining household consumption, already affected by a rise in unemployment since the takeover. Even if new measures to limit the kyat’s depreciation and thus imported inflation – in September 2022, the currency had lost 36% of its value since the coup, with an official rate of 2,100 kyats to the dollar, while the rate on the black market was 3,400-3,600 – come into force, their effects would remain greatly limited. Central bank policy appears inefficient on the valuation of the kyat, having to contend with the impacts of political turmoil, economic circumstances, and global financial tightening. Furthermore, amid fewer official sources of international financing, the financing of public debt constitutes an additional upward pressure on prices. The agricultural sector (23% of GDP, around 30% of exports, and half of employment) will therefore continue to suffer from higher input and energy prices, as well as from the dangerous security situation in rural areas. Despite the opening of the Myanmar-China railway in 2022, which could boost merchandise exports to the first Myanmar export destination (15% of the total in 2021), the export outlook could remain affected by foreign exchange and trade restrictions. Furthermore, while the country might have enjoyed the benefit of being a net fuel exporter in a context of high prices, mineral fuel being the second main commodity exported (21% of the total), withdrawals by several foreign companies (TotalEnergies, Eneos, Chevron) do not bode well. Global economic conditions may also affect demand for clothing, the top export goods representing a quarter of the total. Meanwhile, exports of services will also be constrained, with tourism revenues remaining trivial. Lastly, political and economic circumstances should continue to drag on private investment. However, Myanmar continues to receive Chinese investment as part of the New Silk Road project.

 

External liquidity stress

Since the military coup, public revenue declined amid the economic downturn, thereby slashing business and household income, as well as state-owned energy companies’ profits. Although spending has also taken a hit, the budget deficit has widened and should remain elevated in FY2023. This will result in a rise in public debt. The latter jumped from less than 40% of GDP in FY2020 to over 60% in the following years because of higher deficits, timid GDP growth after the sharp contraction of GDP in FY 2021, and the depreciation of the kyat. Before the crisis, 30-40% of the public debt was external.
The current account has traditionally been in deficit. The economy is dependent on imports of capital and consumer goods, and materials for infrastructure projects and medical equipment. This deficit was financed by FDI and Chinese loans. Since the coup d’état, the hit on foreign investments into the country suggests that current deficits are unlikely to be fully financed, leading to a depletion of international reserves. The latter represented 6 months’ worth of imports in March 2021 but are consequently estimated to have drastically shrunk, triggering liquidity issues. In the summer of 2022, Myanmar’s central bank ordered local companies and banks to suspend and reschedule repayments of foreign loans.

 

Last updated: February 2023

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