The Economic Fallout of Myanmar

The misery of Myanmar returned in the form of a nightmare. A country that parted ways with autocracy a decade earlier, welcomed the familiar intruder again a few months ago. The gradual economic progress made by the nascent democracy plummeted and a crisis stands today unlike ever before. A country that was deprived of freedom, ironically after gaining supposed independence in 1948, for almost half a century hardly expected a stark return to the whims of the fascist authoritarians after only a glimpse of democracy. However, with a global pandemic wreaking havoc and persistent military seizing freedom, the new power dynamics imply a prolonged state of despair for the Southeast Asian country.

Under the premiership of Nobel laureate Aung San Suu Kyi, the leader of the National League of Democracy (NLD), Myanmar achieved quite an assortment of economic milestones. As the military receded from governance in 2011 and democracy prevailed, international trade flourished in the fledgling economy of Myanmar. The domestic industries gained competence as effective policies added momentum to the industrial renaissance of Myanmar. While NLD’s political shortfalls and diplomatic hypocrisies were lamented throughout the decade (adding to the growing notoriety of Suu Kyi’s duplicitous policies regarding ethnic minorities), Myanmar’s economy bustled due to significant political and economic reforms.

According to the World Bank estimates, Myanmar’s economy grew at an average annualized rate of 7% since 2011 due to a sophisticated economic framework put into place by the Suu Kyi regime. Effective policies reformed the stunted financial institutions while trade bloomed as a result of the prime integration of Myanmar in the regional markets of Asia. Reportedly, Myanmar’s poverty significantly diminished from a colossal 48% to 25% between 2005 and 2017. The World Bank report suggested that Myanmar’s effective transition to democracy led the country towards a much-harkened reform of social inclusion which consequently rewarded broad-based sustainable growth and rapid economic expansion.

Prior to the pandemic, the World Bank forecasted Myanmar’s growth of about 6.3% in the FY19/20. The forecast was largely based on the premise that Myanmar was gaining ground in terms of liberated products and free markets along with improving human capital and receipt of exponential Foreign Direct Investment (FDI). The World Bank expected that the economy would respond strongly: building pace over a robust economic performance of the preceding fiscal year. Perversely, the economy grew only by 1.7% as global supply shocks pulled the leash. Coupled with stagnated investment and stringent measures put into place to curb the spread of the virus, the surmised economic expansion evaporated.

The goal was to maximize the productivity of human capital by ensuring equitable distribution of wealth while putting more civil liberties into place to allow prosperity to pull Myanmar out of the slump inflicted by the pandemic. Ironically, the reverse happened!

A military coup launched on 1st February 2021 not only displaced the elected government of Myanmar but also extinguished the flickering optimism of an economic revival. The arrest of Aung San Suu Kyi, along with the top brass of NLD, sparked a Civil Disobedience Movement (CDM) which continues to this day. The CDM led to strikes, protests, and a splurge of resignations from public and private offices. The resulting use of force by the ruling Junta (Myanmar’s military) has been brutal. Nearly 1000 civilians have been killed as the crackdown continues to decimate the movement. However, neither the protestors nor the incarcerated leaders have given up their agenda to denounce the unfair regiment.

The economy, as a result, has further plummeted into despair. As sanctions were imposed by the United States and the UK, businesses evacuated the country. The FDI has dried up and international conglomerates like oil companies and telecommunications giants have joined the defiance against an oppressive regime. Medical practitioners, along with a vast array of professionals, have since abandoned their jobs in protest. The resultant shortage of essential services has rendered the country battered to an unimaginable extent. Furthermore, the Junta has ceased all banking operations (sparing a few) and paralyzed the internet connectivity throughout Myanmar. All the chaos has led to the abysmal ground reality we witness today in the streets of Yangon and Mandalay.

The World Bank earlier forecasted a 10% contraction in Myanmar’s GDP in 2021: a stark comparison to the 6.8% expansion clocked just two years earlier in FY18/19. However, the new estimates released project that the economy would contract by 18% by the end of FY21. The renewed estimates have further highlighted that the poverty figure would double the level of 2019 by 2022 as resignations and boycotts continue to mount amidst a surging delta variant. It is clear how resoundingly the economy has upended in the past couple of years; the decline accelerated by the military intervention and the third wave of the Covid Pandemic.

In the past few weeks, almost 80,000 new Covid cases have been reported in Myanmar. However, despite China’s support, the country is facing a major shortage of oxygen cylinders and vaccines. Moreover, the value of Myanmar’s Kyat has perished by almost 20% against the greenback. Worsened by the deliberate cash shortage, maneuvered by the Junta to impede the flow of finance to the protesters, the country is facing an immediate health crisis. The citizens are now resorting to barter goods in exchange for necessities like food, oxygen cylinders, and even medical services while the currency is heading towards a rapid devaluation similar to the purgatory-like situation in Venezuela.

U Hein Maung, a Burmese economist, stated: “The value of Myanmar’s currency is rapidly going down but it hasn’t hit bottom. The crisis can only be resolved with political change”. However, with Junta extending its stay till 2023 on a shaky promise of holding elections, the financial and social debacle of Myanmar is all but certain to further worsen.

Syed Zain Abbas Rizvi
Syed Zain Abbas Rizvi
The author is a political and economic analyst. He focuses on geopolitical policymaking and international affairs. Syed has written extensively on fintech economy, foreign policy, and economic decision making of the Indo-Pacific and Asian region.