World Bank sees Myanmar’s economy shrinking on conflict, quake

MYANMAR’S economy will contract this year amid civil war and ongoing drag from a March earthquake, according to the World Bank, which sees growth also constrained by weak domestic demand, labour shortages and frequent power outages.

The Washington-based development lender projected Myanmar’s gross domestic product will shrink by 2 per cent in the year ending March, compared with its previous estimate for a 2.5 per cent contraction. That’s in contrast to the military government’s growth forecast of 3 per cent.

Inflation has eased, but is expected to remain above 20 per cent in the near-term, maintaining pressure on living costs, the World Bank said in its latest Myanmar Economic Monitor released on Monday (Dec 8).

The local currency, the kyat, has steadily strengthened following a sharp depreciation last year, while companies operated at higher capacity and freight transport volumes increased in recent months, according to the report.

“These early signs of recovery are encouraging,” Melinda Good, division director for Thailand and Myanmar, said in a statement accompanying the report.

“However, Myanmar’s economy continues to face formidable obstacles, including constrained reconstruction financing, ongoing conflict and insecurity, and unreliable electricity supply,” she said.

The South-east Asian country has been struggling with a crippling economy and ongoing civil war since the military ousted Aung San Suu Kyi’s civilian government in 2021. Junta chief Min Aung Hlaing pledged to hold a long-promised general election in stages, with the first phase set for Dec 28, in an effort to regain stability and international recognition.

The World Bank forecasts a moderate rebound in the next fiscal year, with growth driven primarily by post-earthquake reconstruction and continued assistance for affected people. It noted that fiscal challenges will persist, with the deficit projected to reach 5 per cent of GDP in that period.

Persistent conflict has worsened humanitarian needs and disrupted markets, with intensification of food insecurity affecting 12.4 million people, and 22 million in need of humanitarian aid. Power shortages resulted in a decline of economic activity, particularly in manufacturing, the World Bank said.

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It added that remittance inflows are expected to remain strong, but the conflict will continue to hamper tourism and transport.

The country was struck by a devastating 7.7 magnitude earthquake in March, which killed more than 3,800 people and injured more than 5,000. BLOOMBERG