Penrose Thitsa 

Despite some stabilization in the economic conditions of Myanmar during the first half of 2023, the country’s businesses are still encountering various obstacles, revealed the World Bank's semi-annual report Myanmar Economic Monitor (June 2023). Additionally, household incomes remain fragile, and there is a growing concern regarding food security in the junta-ruled Myanmar, said the World Bank’s report entitled “A Fragile Recovery - Special Focus on Employment, Incomes and Coping Mechanisms”.  

The report highlights that economic activity in Myanmar is gradually picking up, albeit from a low starting point. In the first half of this year, exchange rates have maintained stability, and there has been a reduction in inflation related to food and fuel prices.  

“The parallel market exchange rate remained broadly stable between January and May, albeit 27 percent lower against the US dollar than in June 2022 and depreciation pressures appear to have reemerged in recent weeks. The official rate has remained unchanged, but a 25-30 percent gap with the market exchange rate persists,” said the report. 

Average annual inflation is projected to decrease to 14 percent by September 2023, compared to 18.3 percent in the previous year, and is expected to decline further in 2024. 

GDP is projected to grow by 3 percent in the year to September 2023, which is still approximately 10 percent lower than the levels recorded in 2019, according to the report, which says the economy continues to face significant supply and demand constraints, hampering its overall performance. 

The report says the economy is forecasted to experience gradual expansion in the next one to two years, but with uneven distribution. 

In the press release for the World Bank’s report, Mariam Sherman, the World Bank's Country Director for Myanmar, Cambodia, and the Lao PDR, stated that, “While Myanmar is again making economic progress, the growth is unequal and the poorest are being hit hard by consecutive shocks.” 

“Worryingly, progress against malnutrition seems to have halted or reversed. More than half of households have been forced to sell assets, increase borrowing, or limit their spending, including on health and education. Such coping strategies will not only damage welfare in the short term, but also affect longer-term earning capacity,” she said.  

The report says the outlook for Myanmar's economy faces several risks, the escalation of armed conflicts, electricity generation disruptions, persistent inflationary pressures, import restrictions and a further deterioration of the ruined business environment in Myanmar. 

According to the report, many businesses are grappling with constraints that impede their progress. High prices and import restrictions make it difficult for businesses to acquire the necessary inputs for their business operations. Reported profits, except in agriculture, have declined compared to the previous fiscal year, primarily due to a significant rise in the prices of imported inputs during that period. 

Furthermore, due to the persistently high food prices and ongoing labor market fragility, household incomes in Myanmar continue to face significant pressure, according to the report. The impact on employment and income has been particularly severe in states and regions that are more heavily affected by the ongoing armed conflict.  

“The combination of weak employment, fewer hours worked, and increased incidence of casual or self-employed work has reduced the earning capacity of many families. Wages dropped by an average of 15 percent in real terms between 2017 and 2022 and almost half of Myanmar households reported that their incomes declined over the course of 2022,” said the press release for the report. 

The press release says food security and nutrition deteriorate in the first half of 2023, with a significant increase in concerns about food shortages among farming households. 

“As a result, food security and nutrition appear to have worsened during the first half of 2023, with coping mechanisms becoming increasingly strained. According to a May 2023 World Bank survey, 48 percent of farming households worry about not having enough food, up from about 26 percent in May 2022. The survey also shows a notable drop in the consumption of nutritious foods such as milk, meat, fish, and eggs,” said the press release. 

According to the report, household coping mechanisms have been strained due to the cumulative impact of various shocks on incomes, employment, and prices. Over half of households in Myanmar have resorted to reducing their assets, increasing borrowings, or cutting down on spending. As a coping strategy, a smaller but still significant proportion of households (5.8 percent) have opted for long-term migration, with most migration occurring within Myanmar rather than to countries like Thailand or Malaysia. Households that migrated within Myanmar since 2021 were less likely to own assets, experienced deeper income losses and were more likely to be working than other households within the same township. 

The World Bank also says that power cuts persist as significant challenges.  

“Power outages have become an even more pronounced challenge since early 2023, with 42 percent of all firms and over half of manufacturing firms reporting power outages as the most significant constraint to their operations in March,” said the report. 

The report was collaboratively prepared by a team consisting of Kim Alan Edwards (Program Leader and Senior Economist), Kemoh Mansaray (Senior Economist, Task Team Leader), Thi Da Myint (Country Economist), Faya Hayati (Senior Economist), and Aka Kyaw Min Maw (Consultant). 

The World Bank also held a report launch webinar in the morning of 27 June and Mariam Sherman, Kim, and Kemoh made presentations. 

Referring to the power cuts during the report launch webinar, Kim Alan Edwards said, “You can see, in some parts, you know, electricity has been out for very significant portions of the day even in Yangon, sort of averaging eight hours per day through March to May period. In other areas, you know, this electricity has been even worse. And if you think about the implications for business, what that means is that they've been forced to rely on diesel generators and alternative sources of electricity if they want to continue operating. And these, we know that these tend to be much more expensive than relying on the grid. So, this is just another added cost of doing business in Myanmar at the moment.”