Economic studies
Myanmar

Myanmar

Population 53.2 million
GDP 1,527 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 6.8 3.2 -18.0 -0.1
Inflation (yearly average, %) 8.6 5.7 4.1 6.5
Budget balance (% GDP)* -3.9 -5.6 -7.8 -7.0
Current account balance (% GDP) -2.8 -3.4 -0.8 -1.0
Public debt (% GDP) 40.6 53.3 63.0 65.3

(e): Estimate (f): Forecast * Interim period: October 2021 to March 2022. New fiscal year starting 1 April 2022, ending 31 March 2023

STRENGTHS

  • Abundant commodities (minerals including jade, ruby, copper, gold, gas and oil), hydroelectricity opportunities
  • Proximity to dynamic economies (India, China, Thailand)
  • Great potential for tourism
  • High potential of the primary sector (agriculture)
  • Young population (27% of the population is under 14 years old)
  • Reduction of poverty
  • Availability of low-cost labour
  • Member of ASEAN

WEAKNESSES

  • The coup d'état has isolated the country and its economy, despite some relations with its neighbours
  • Corruption is highly endemic and the business environment is poor
  • Ethnic 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 (Shan, Karen, Kachin...). 135 ethnic groups are present in the country, with the majority Bamar ethnic group representing 68% of the population.
  • Inefficient central bank
  • Lack of diversification and infrastructure (electricity, refining, education, healthcare)
  • Underdeveloped financial sector
  • Country highly exposed to natural disasters (earthquakes, cyclones, floods, etc.)

RISK ASSESSMENT

The 2021 coup d'état closes the democratic interlude that began in 2011

Alleging electoral fraud (denied by all international observers) in the November 2020 legislative elections for the renewal of both houses, in which Aung San Suu Kyi's party emerged victorious, the military seized power in early February 2021, but not without detaining Aung San Suu Kyi and the other main leaders. Aung San Suu Kyi, leader of the National League for Democracy (NLD) and winner of the Nobel Peace Prize for her promotion of democracy, had become a state advisor in 2015 following the first free parliamentary elections since 1990. This role was given to her to govern without being president (the Constitution prohibits it because of her family ties abroad). President Win Myint, elected in 2018, was the first president not to be part of the military in more than five decades. The military takeover under the command of General Min Aung Hlaing led to major protests, with episodes of heavy violence: more than 1,000 deaths and tens of thousands of arrests. Some of the protesters also joined the pre-existing armed rebellions of minorities, setting aside ethnic antagonisms. Following the coup, the Biden administration and the European Union announced sanctions in March 2021. 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 Myanmar has been excluded from the organisation's annual meeting, it has not been suspended, as some member countries are insisting on the principle of non-interference. Despite international pressure, the military junta sentenced Aung San Suu Kyi to four years in prison in December 2021.

 

Sharp contraction of the economy due to the coup and the pandemic

Myanmar's economy contracted sharply in 2021, due to the situation brought about by the health crisis and the military coup. In 2022, GDP is expected to stabilise at a far lower level than before the crisis. Tourism revenues (4.6% of GDP and 4.8% of the labour force), will remain trivial. Revenues from exports of goods (25% of GDP in 2020) also fell. Clothing exports (27% of the total) contracted sharply (-27% between September 2020 and June 2021). Exports of natural gas (20% of the total), especially to Thailand, also declined, and may continue to do so in 2022 with the cessation of activities of foreign operating companies, under Western pressure. Gemstone exports (10% of the total) have collapsed. The agricultural sector (23% of GDP and 20% of exports) has performed well in terms of exports (+31%) despite a 10% contraction in production in FY2021. The trade balance is still expected to contribute negatively to growth in 2022: the depreciation of the kyat will increase the cost of even reduced imports, and exports will remain constrained by the situation in the country. Domestic demand will remain weak because of household impoverishment in 2021. In addition to rising unemployment, households face significant inflation of imported goods, further reducing their purchasing power. Inflation, though mitigated by weak domestic demand, will be strong due to the huge depreciation of the kyat and likely monetary financing of the deficit. The country remains extremely vulnerable to the virus, the proportion of the population vaccinated not exceeding 20% in November 2021. Political instability, economic disruption, and violence have strongly discouraged investment by many partners. Moreover, some major global companies have suspended their projects in the country. Major industrial and infrastructure projects, particularly in Yangon, have been affected. However, Myanmar continues to receive Chinese investment as part of the New Silk Road project.

 

Sharp deterioration of public accounts

In fiscal year 2021, the public deficit increased due to the decline in tax revenues (30% of total government revenues in 2019). Impoverishment and lower household consumption have thus played an important role in the reduction of these revenues. Revenues from state-owned energy companies (the bulk of non-tax revenues) have also declined. As a result of the increase in the public deficit, the public debt rose considerably. This increase is further explained by the significant contraction of GDP over the year and the depreciation of the kyat. The persistence of the deficit and the depreciation of the kyat could cause a further increase in public debt in the 2021-2022 fiscal year. Before the crisis, the share of bilateral debt constituted the majority, held largely by China and Japan.

 
The current account has traditionally been in deficit. The economy is dependent on imports of refined petroleum products, capital and consumer goods, and materials for infrastructure projects and medical equipment. This deficit was financed by FDI and Chinese loans. The current account deficit is expected to almost disappear in fiscal years 2021 and 2022. Indeed, the trade deficit will decline as imports fall more than exports due to falling domestic demand and import controls. Foreign exchange reserves represented about 5 months’ worth of imports in 2020 and will change little.

 

Last updated: February 2022

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