Webinar on “A Near-Term Economic Outlook for Myanmar in 2024”

In this webinar, Dr. Jared Bissinger discussed the ongoing challenges of Myanmar’s economy close to three years after the 2021 coup, and the overall economic trajectory for Myanmar for the near future, including the implications of the offensive Operation 1027 launched in northern Shan State in late October 2023, which has affected the main China-Myanmar border trade corridor and key border trade posts.  

Myanmar Studies Programme Webinar

Wednesday, 13 December 2023 – The ISEAS Myanmar Studies Programme convened a webinar under Chatham House Rule inviting Dr. Jared Bissinger to share his insights on the state of Myanmar’s economy, including the impact of the recent Operation 1027. Ms. Moe Thuzar, coordinator of the ISEAS Myanmar Studies Programme, moderated the webinar, which attracted the interest of 58 attendees.

Speaker Dr Jared Bissinger (right) with moderator Ms Moe Thuzar. (Credit: ISEAS – Yusof Ishak Institute)

Dr. Bissinger cautioned that data on Myanmar’s economy, especially from the State Administration Council (SAC), has become increasingly problematic since the coup, though it could still be useful to identify some important trends. Some data from independent sources is also available and can help better understand important economic developments. Myanmar’s economic performance since the 2021 coup has been poor, as evidenced by the fall in GDP, decline in real wages, high levels of inflation, departure of numerous major foreign investors, and dearth of new investment.

Dr Bissinger’s discussion covered: 1) the Myanmar economy’s performance since the 2021 coup, 2) major structural changes that have taken place due to policies by the SAC and increase in conflict across the country and 3) the outlook for 2024, including implications of Operation 1027. Key points include:

  • The 2021 coup affected the economic dramatically, contributing to a severe contraction of GDP (-18%) in FY20/21. The coup has also contributed to declining real wages and a substantial and ongoing rise in poverty, with over 40% of people in Myanmar now living below the poverty line. Inflation has also increased dramatically since the coup. According to official data, the total increase in prices from February 2021 to March 2023 was 47.6%, however this figure probably underestimates the true extent of inflation.
  • The SAC undertook major interventions in the financial sector and with the exchange rate. These changes have generally worsened the economic situation and failed to stem the declining exchange rate. There is widespread distrust in banks and the Myanmar kyat as a store of value; people have shifted back towards property and gold as long-term stores of value. Access to cash and loans (especially microfinance) is a challenge. In June 2023, the PACT Myanmar Microfinance, the largest provider of microfinance in Myanmar, left the country due to the challenges presented by SAC regulations.
  • The SAC introduced major changes in the legal and regulatory framework for trade. They adopted import licenses for many imports to reduce foreign exchange from leaving the country. Many businesses have struggled to obtain import licenses, a situation that has reportedly worsened during 2023. Additionally, many exporters have started undervaluing exports to circumvent the SAC’s new regulations that require them to exchange a share of their proceeds at an artificially fixed (and undervalued) rate. This both distorts trade data and may facilitate reduced foreign exchange inflows into the country.
  • Exports to the European and American markets (particularly garments) look set to decline in 2023, after hitting a high in 2022, after a number of major retail clothing brands decided to cease or limit operations in Myanmar. However, exports to trade partners in Asia (such as India and Japan) in 2023 are holding steady compared to 2022 levels.
  • Myanmar has experienced a significant growth of informal trade since the coup. The country has also seen growth in illicit economic activities, including opium cultivation, and illicit trade, with important transnational implications for both.
  • Employment, including in the formal sector, and productivity have declined since 2021. Real wages (adjusted for inflation) are also down. Though the minimum wage was increased to 5800 MMK in October 2023, high inflation – especially in late 2022 and early 2023, means that this increase does not come close to making up for the decline in real wages.
  • Myanmar’s poor economic performance has not just been the result of technically poor policies or economic incompetence. Instead, it is the result of a fundamental change in the objective of economic governance. The SAC’s approach to economic governance is primarily designed for its own preservation. Economic growth is a secondary objective. Economic policies are often designed with a view towards resource extraction and legitimisation. The military is focused more on controlling strategically important sectors of the economy (e.g. telecommunications, exchange rate) with fewer interventions in areas it views as less strategic (e.g. retail).
  • In the current scenario, the Myanmar military’s overall level of control over important economic sectors and territory is significantly diminished, while a range of other actors such as the parallel National Unity Government, EAOs, and PDFs play an increasingly important role in shaping economic activity.
  • Operation 1027 in late October 2023 has some important economic implications related to border trade. In the immediate aftermath of the attacks China-Myanmar border trade dropped dramatically, though has rebounded somewhat since. This has affected Myanmar’s agricultural exports significantly, and has also hurt sectors that depend on imported Chinese inputs, such as manufacturing. Operation 1027 has not affected or damaged China-Myanmar Economic Corridor projects. China has a strong interest in continuity both for these projects and for border trade, and will use its influence with all groups to protect these interests. While EAOs and other armed actors now have greater influence over trade, there are notable technical and institutional barriers that limit EAOs’ abilities to take over border-trade processing.

Dr. Bissinger’s concluding thoughts on challenges that Myanmar’s economy may likely face in the foreseeable future include: continued inflation, continued foreign businesses’ exit from the country (albeit at a slower pace than in 2021), limited prospects for growth, more human capital outflows, and very limited investment inflows. These challenges will significantly affect both individuals and businesses. The Myanmar populace faces continued erosion of jobs, livelihoods and real incomes.

In the Q&A session, Dr. Bissinger also addressed questions related to parallels and differences in economy under the current and previous military regimes, the resistance movement’s financing mechanisms, changes in remittances and labour mobility with the increase of outward migration after the coup, the growing drug trade, and the impact and implications of current and potential new sanctions curtailing the SAC.