Myanmar's economy at risk from a likely prolonged civil conflict: Fitch Solutions

MYANMAR will likely see a protracted civil conflict that may last years, posing risks to the country's economic prospects and business environment, Fitch Solutions Country Risk and Industry Research said on Wednesday (Jan 5).

Myanmar, which has been under a coup by the military junta since February 2021, will likely also face increasing isolation from the rest of the world moving forward.

Fitch Solutions has a Short-Term Political Risk Index score of 34.2 out of 100 for Myanmar, to reflect the severe risks the political crisis poses on the economy.

The State Administration Council (SAC) - the military junta's official name - will unlikely see a swift victory, as it faces an increasingly organised rival government, the National Unity Government (NUG), the research team said. The NUG aims to depose the junta and establish a democratic, federal system in Myanmar.

Internationally, Fitch Solutions expects a more determined effort from Asean and the West to push back against the coup and support the NUG.

It noted that the US recently passed a defence Act that supported and legitimised the NUG, allowing the NUG to depend on external support to maintain its campaign against the SAC in the long run.

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The Act also simultaneously denied legitimacy and resources to the junta, which should pose greater challenges for the SAC to restore civilian rule in Myanmar and gain international recognition.

Meanwhile, the business environment in Myanmar faces risks of the international community imposing penalties on businesses that deal with the junta. Currently, the NUG is warning businesses not to actively engage the SAC, which has increased attacks on businesses that do, the research team noted.

Myanmar's economic development will likely also suffer as more resources are spent on military ventures. SAC will likely have to constantly be on guard against the NUG, while also devoting significant resources to manage conflict at the country's borders.

Fitch Solutions expects the resulting economic hardship will reduce any support for the junta and increasingly attract recruits and collaborators for the NUG and its armed forces, which should further prolong the conflict.

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