SIM Report: Post-coup economic damage, COVID-19 exacerbate high instability risks in Myanmar
Myanmar’s economic outlook is expected to worsen further, likely increasing social and political instability and deterring foreign investors. The World Bank in its Myanmar Economic Monitor report on 26 July forecasted that Myanmar’s economy will shrink by 18 per cent in the fiscal year ending in September 2021. The contraction is due to the combined impact of social and political unrest since the 1 February military coup d’état and the COVID-19 pandemic, according to the report. The lender also said that shutdowns, strikes, and internet blackouts have decreased liquidity and restricted the banking industry, with the local kyat currency depreciating by approximately 23 per cent against the US Dollar. The contraction would mean that the country’s economy falls about 30 per cent short of what it may have been without the coup and COVID-19. Myanmar’s poverty levels will also probably ‘more than double’ by the beginning of 2022 compared with 2019 levels, according to the World Bank.
The impact of the coup on Myanmar’s workforce has also become evident. The International Labour Organization, the UN’s labour agency, recently found that employment in Myanmar had contracted by 6 per cent in Q2 2021 compared to Q2 2020, indicating estimated losses of around 1.2 million jobs. The findings illustrated ‘a continuous deterioration in labour market conditions’ in the post-coup period. The hardest-hit sectors include the construction sector with a 35 per cent reduction in employment, followed by the garment sector by 31 per cent, and tourism and hospitality by 25 per cent. Overall, the continuing decline in Myanmar’s economy and job losses are likely to further fuel social and political unrest, adding to high instability risks.
Myanmar has been in a state of high instability following the 1 February coup, in which the military took over after accusing the Aung San Suu Kyi-led National League for Democracy (NLD) of electoral fraud in the November 2020 election. The coup has been met by a nationwide protest movement that has been violently suppressed by the military, which has killed more than 900 people, according to a local monitoring group. Work stoppages carried out as part of the nationwide Civil Disobedience Movement have heavily slowed the economy, forcing the closure of numerous banks and leaving authorities unable to issue bills or collect taxes. Economic damage caused by violent unrest and labour strikes is likely to be further compounded by the military junta leadership’s failures in managing Myanmar’s COVID-19 response. The junta’s difficulties have been exploited by the National Unity Government (NUG), or the country’s domestically situated shadow government composed of ousted former lawmakers.
The NUG recently announced the formation of a COVID-19 task force to suppress a worsening outbreak and boost the shadow government’s efforts towards international recognition. The Delta variant has caused infections to surge in Myanmar, with an official daily caseload of over 6,000 in late July. However, significant volumes of imported cases in neighbouring countries such as China, where Yunnan province recently accounted for the highest daily caseload since January, are a more reliable indicator of the severity of Myanmar’s wave of COVID-19 infections. Ultimately, the NUG’s efforts will likely be stymied given the control and continued international recognition of the junta government, which is seeking financial aid from the Association of Southeast Asian Nations (ASEAN) and unspecified ‘friendly countries’ in the international community to combat the virus, according to state newspaper Global New Light of Myanmar on 28 July. Myanmar has low vaccination rates against COVID-19, with only around 1.75 million people out of a population of 54 million vaccinated so far. This is largely due to striking healthcare staff and vaccine supply shortages. The UN special rapporteur for human rights in Myanmar called the country a ‘COVID-19 super-spreader state’, given the potential for transmission across porous borders into several neighbouring countries with large populations. Beyond reputational, financial, and liability risks of maintaining operations under the junta, the worsening COVID-19 situation and attendant protracted economic fallout will likely accelerate the exit of foreign businesses from the country over the coming 6-12-month period.
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