MAJOR MACRO ECONOMIC INDICATORS
|2018||2019||2020 (e)||2021 (f)*|
|GDP growth (%)||6.4||6.5||2.0||5.6|
|Inflation (yearly average, %)||6.0||8.6||6.1||6.2|
|Budget balance (% GDP)||-3.0||-3.9||-6.0||-6.5|
|Current account balance (% GDP)||-4.7||-2.6||-3.5||-4.2|
|Public debt (% GDP)||40.4||38.8||42.8||45.2|
(e): Estimate (f): Forecast *Fiscal year 2021: October 2020 to September 2021
- Economy is gradually opening up
- Abundant commodities, including minerals (jade, copper and gold), gas and oil; hydroelectricity opportunities
- Close to fast-growing economies (India, China, Thailand)
- Major tourism potential
- High potential of the primary sector (agriculture)
- Youthful population (27% of the population under 14 years of age)
- Poverty is decreasing
- Availability of low-cost labour
- ASEAN member
- Highly endemic corruption and a failing business environment
- Ethnic problems related to the Buddhist majority’s intolerance of the Rohingya Muslim minority but also of Buddhist minorities, including the Shan, Karen and Kachin groups, which have armed wings.
- International condemnation of discrimination against minorities: 135 ethnic groups are present in the country, the majority Bamar ethnic group represents 68% of the population.
- Ineffective central bank
- Lack of diversification and infrastructure (electricity, refining, education, health)
- Underdeveloped financial sector
- Country highly exposed to natural disasters, including earthquakes, cyclones and floods
Recovery driven by investment
Economic growth slowed significantly in 2020 due to the crisis, although the country remained one of the best performers in the region. A partial lockdown was implemented in cities, along with travel restrictions, and factories (especially textile plants) were closed as the virus spread. The economy was also impacted by the decline in tourism activities (4.6% of GDP and 4.8% of the labour force in 2019), supply chain disruptions for the clothing sector and losses for SMEs, which led to layoffs that hurt private consumption (50% of GDP). However, the decline in consumption moderated inflation. Myanmar’s COVID-19 Economic Relief Plan for 2020 included emergency fiscal and monetary measures, such as subsidised credit for small businesses and self-employed people, and food and money for households. Some of these measures will extend into the first months of 2021. The Central Bank of Myanmar lowered its policy rate to 7%. Investment, particularly from abroad, which had been increasing until the crisis, will drive a recovery in activity in 2021. The Myanmar Investment Commission approved 219 new foreign projects in the country between October 2019 and July 2020, for a total of USD 5 billion. Although mainly in power generation, these FDI were also directed towards real estate, manufacturing, and the oil and gas industry. However, as new investments may be delayed due to travel restrictions and business interruption caused by the pandemic, three projects are being given priority: Hlegu Industrial Park, Yangon Amata Smart and Eco City, and the South Korea-Myanmar Industrial Complex.
The current account deficit and FDI are growing
The budget deficit increased due to higher expenditures linked to the fight against COVID- 19. At the same time, revenues, mainly from sales of goods and services by state-owned enterprises and taxes, declined because of the economic slowdown. The level of public or state-guaranteed external debt will remain sustainable (about 20% of GDP in 2020) and the associated risk is considered low by the IMF (mostly concessional debt), although it warned that the level of the central bank’s foreign exchange reserves (equivalent to three months of imports) is too low. Domestic debt has been purchased by the central bank.
The current account deficit widened as exports (of clothing and gas) fell sharply due to supply chain disruptions, weak external demand and lower international gas prices. Imports declined less steeply, as higher purchases of medical equipment outweighed the decline in demand for capital goods, which was related to the downturn in investment. The income deficit is also expected to increase in line with profit repatriation by foreign companies. Despite declining, FDI will finance the current account deficit. The New Companies Law passed in 2019 facilitates access to the Burmese market for non-residents and should encourage foreign investment in the aftermath of the crisis.
Treatment of minorities inconsistent with democratic improvements
Aung San Suu Kyi, leader of the National League for Democracy (NLD) and winner of the Nobel Peace Prize for her promotion of democracy, became a state councilor in 2015 following the first free parliamentary elections since 1990. This role allows her to govern without being president, as the constitution prohibits her from holding this position because of her family ties abroad. President Win Myint, who was elected in 2018, is the first president without a military background in more than five decades. Nevertheless, a substantial part of power remains in the hands of the military, which has a constitutional right to 25% of the seats in parliament and control of key ministries. Although lockdown measures prevented parties from campaigning, and despite the cancellation of elections in Rahkine State, where the conflict has intensified between the Arakan Army, which is demanding self-rule, and Myanmar’s armed forces, elections to the House of Representatives (lower house) and the House of Nationalities (upper house) were held on 8 November 2020. These confirmed the dominant position of the NLD and of Aung San Suu Kyi. Nevertheless, following allegations of electoral fraud, the military seized power in early February 2021 after detaining Aung San Suu Kyi and top leaders in an apparent coup, impeding the democratic shift smoothly. Aung San Suu Kyi’s international stature has been tarni- shed by her passive handling of the Rohingya crisis, but her domestic popularity is still intact. Originally from Bangladesh, members of the Muslim minority Rohingya community have never obtained citizenship. Since August 2017, they have been abused by the army. The UNHCR estimates that 10,000 people have been killed and more than 740,000 have sought refuge in Bangladesh. The UN has called the situation “ethnic cleansing”. The EU, the U.S., the UK and Australia have all imposed economic and political sanctions and organised a joint donor conference with the UN Refugee Agency on 22 October 2020 to promote support for Rohingya refugees and host countries. As relations with the West cool, Myanmar is fostering stronger ties to ASEAN and China.
Last updated: March 2021