YANGON—In its latest Economic Monitor report, the World Bank (WB) forecasts that Myanmar’s economy will start a slow recovery in March next year, but warns the country’s poverty rate could increase due to ongoing restrictions to curb the spread of the pandemic in the country.
The bank on Wednesday suggested the government focus on relief measures that slow the spread of the virus while also protecting the most vulnerable in the short term.
Myanmar’s economic growth is projected to remain subdued at 2 percent in the current fiscal year 2020-21 due to economic disruptions associated with COVID-19 containment measures imposed in December, the WB said.
However, it projected growth would slowly recover starting from March 2021, provided mobility restrictions are gradually relaxed and cases of local transmission of the virus slow.
Despite the impacts of the pandemic, the outlook for the medium term is positive with growth estimated to recover to 7 percent on average due to public investment, a resurgence in manufacturing, and productivity gains associated with the adoption of digital technology, the bank said.
The WB’s economic growth estimate for FY2019-20 was 1.7 percent, down from 6.8 percent the previous year.
The bank also said the poverty rate could increase to 27 percent in the current fiscal year from 22.4 percent a year earlier, and estimates it will return to the pre-crisis level in FY2021-22 at the earliest.
It said the first wave of COVID-19 forced many poor households to adopt risky and unsustainable mechanisms to buffer the shock, including reducing their daily food consumption.
The bank found that even before the second wave hit in late August, many households were struggling to repay their debts. The ongoing restrictions imposed during the second wave have put more households at risk of entering poverty, it said.
“Myanmar needs to act fast in implementing its COVID-19 response plans to support the economy and mitigate increases in poverty,” said Mariam Sherman, World Bank country director for Myanmar, Cambodia and Laos.
“In the short term, the government should focus on measures that slow the spread of the virus, provide relief and food security to the poor and most vulnerable, and support economic activity. Over the longer term, public investments in infrastructure and digital technologies can increase domestic demand and employment, while boosting the productive capacity of the economy,” Sherman said.
Stay-at-home measures imposed during the second wave of the outbreak have had greater negative effects on businesses than the first, the WB said.
The WB’s survey on Myanmar for October revealed that nearly half of all businesses in the manufacturing and service sectors do not expect to recover from the economic effects of the pandemic, while a reduction in sales is the top concern of businesses in the country.
Despite its optimism about a recovery next year, the bank warned that risks remain high, given the continued uncertainty about the future evolution of the pandemic, both locally and globally.
In the absence of widely distributed vaccines or treatment, new waves of the pandemic could result in prolonged and potentially more severe restrictions, further dampening domestic activity and constraining job growth, savings and access to educational and health services, it said.
The bank said the government should consider providing support for private consumption and investment. It also suggested the government invest in public infrastructure as a priority to bolster aggregate demand and construction sector activity in the short to medium term, while increasing the production capacity of the economy in the longer term.
It also recommended that Myanmar explore economic opportunities in digital technology, pharmaceutical production, insurance services, health and educational services, and fintech as new growth levers.
Meanwhile, the government is putting the finishing touches on the Myanmar Economic Resilience and Reform Plan (MERRP), in response to the economic damage triggered by the pandemic.
The government said the MERRP includes medium to longer-term economic recovery and reform strategies, ranging from maintaining monetary stability and developing more special economic zones and industrial zones in strategic areas and sectors, to measures to absorb the economic shocks for the most vulnerable groups in the country.
According to U Aung Naing Oo, the permanent secretary of the Ministry of Investment and Foreign Economic Relations (MIFER), the government has spent more than 2.9 trillion kyats (US$2.09 billion) to mitigate the social and economic impacts of COVID-19. That spending includes 1.5 trillion kyats for poor households and the national disaster fund, and more than 399 billion kyats in loans for businesses.
Total spending on COVID-19 measures so far is equivalent to 4 percent of the country’s GDP, according to the MIFER.