The World Bank has forecast economic growth for Myanmar for the 2023-24 fiscal year at 1 percent.
Tuesday’s Myanmar Economic Monitor’s “Challenges Amid Conflict” report said “near-term growth prospects have weakened further” growth prospects from the financial year ending in March 2024.
Economic conditions have deteriorated in the past six months with the signs of recovery observed in the first half of 2023 proving to be fragile and short-lived, said the World Bank.
As macroeconomic volatility resumed, the kyat depreciated by around 18 percent against the US dollar over the third quarter.
Since October armed conflict has escalated across the country, severely disrupting lives and livelihoods, blocking major transport routes and trade channels, and heightening uncertainty around the economic outlook, it reported.
The World Bank said power shortages persist, creating further challenges for businesses and households while the regime has enforced frequent and, in some cases, punitive market interventions.
It said junta interventions have generally been unsuccessful in restoring price stability and the conflict has escalated since October, causing displacement, labor shortages and increased logistics costs.
The report said the kyat’s depreciation and the rise in conflict boosted prices after June.
“The armed clashes have disrupted vital trade routes, particularly in the northern Shan State, which is a major hub for border trade with China. The World Bank observed that operations at several border crossings with Thailand and India have also been disrupted,” said the report.
This has implications for Myanmar’s international trade with land borders accounting for 40 percent of its exports and 21 percent of its imports between March and September.
Key transport routes within Myanmar have been blocked, restricting the movement of people and goods, and leading to shortages of food and other basics. Renewed pressure on the exchange rate and inflation has been triggered by a combination of internal and external development, it said.
Garment firms estimated that power cuts cost them the equivalent of 31 percent of their total sales last year, largely due to the cost of running generators.
“Floods, conflict, high input costs and trade restrictions have limited the ability of farmers to benefit from favorable export prices and curtailed the investments needed to support future production,” said the financial body’s report.
It added that foreign direct investment commitments remain very weak and the fiscal space is constrained, with a widening deficit largely financed directly by the Central Bank of Myanmar. The combined spending on education and health this fiscal year has fallen to around 2 percent of GDP, down from almost 4 percent in 2019-20, the report said.
