Myanmar sidesteps Covid but November polls stays a wildcard

While most countries plunged into recession caused by Covid-19, Myanmar, with its relatively insulated economy, will still experience growth this year. However, the projected growth rates will be the lowest since the military junta handed over powers to U Thein Sein’s quasi-civilian government in 2011 and a subsequent economic boom took place.

According to the International Monetary Fund, Myanmar is projected to grow 6.4% this year, although it will be down 1.8 percentage points from 2019. The Asean+3 Macroeconomic Research Office (AMRO) offers a more conservative forecast of 2.5%. Interestingly, these projections come despite its shuttered borders, worsening conflict in its Rakhine State, a collapse in tourism and dimmer prospects of foreign direct investments.

Between March 24 and May 20, Myanmar implemented a lockdown in a bid to curb the spread of Covid-19. Unsurprisingly, unemployment increased as many factories stayed shut. On April 27, the country’s Ministry of Planning, Finance and Industry launched a Covid-19 Economic Relief Plan (CERP), where it introduced strategies such as the injection of monetary stimulus, allowing improvements to investment trade and the back sector, easing impact of the pandemic on employees and households, promoting innovative products and strengthening healthcare systems.

Pre-Covid growth

Prior to the outbreak of the Covid-19 pandemic, market watchers expected 2020 to be a year of high growth following the pick-up in its economy in FY18/19. AMRO’s economists alluded to the Myanmar Sustainable Development Plan as a positive indication of the nation’s vision for longterm development between 2018 and 2030. Its focus areas include sustainability, job creation and economic growth as well as peace, national reconciliation, security and good governance.

A step in this direction was seen when it hiked tariffs on electricity. AMRO’s economists Jae Young Lee, Paolo Hernando and associate Nyaung Tai say the move benefited the business community through a more stable power supply with less outages, while it may have put households at a dichotomy with the higher prices. Citing data showing an increase in the nation’s growth by 7% in the seven years since 2012 when it embarked on economic reform and market-opening, they noted that electricity consumption correspondingly increased some 15% of average between 2012 and 2018.

“Poor energy infrastructure and the lack of stable power supply are cited as reasons holding back foreign and domestic investments in Myanmar,” they note, adding that the improvement is slated to bring a brighter future. “Mandating higher public utility prices is a difficult policy decision and many governments hesitate to move forward with policies that are unpopular among the people. In this sense, it is very commendable that the government of Myanmar has pushed ahead with the hike in electricity tariffs,” they add.

For now, whether these policies will continue is left to be seen, as Myanmar is scheduled to head to the polls later this year. This marks its third general election in six decades, and is a landmark development for its democratic transition. For now, market watchers say the country’s ruling National League for Democracy (NLD) faces several challenges that could curtail the trajectory towards freedom. Led by Aung San Suu Kyi, the party won a landslide victory in the country’s free national elections.

“Nearly five years on, while Aung and the NLD have undertaken reforms in some areas, they have not lived up to the high expectations that existed when they took office,” observes Prashanth Parameswaran, a fellow at the US-based Wilson Center’s Asia Program. Domestically, he says Aung’s relationship with the local ethnic groups has worsened over the years, dimming hopes for national reconciliation. Abroad, her reputation suffered somewhat as well because of the same issue.

To this end, Parameswaran says the outcome can go either way. “It is also important to keep in mind that the focus on Covid-19 can cut both ways: It can exacerbate the NLD’s governance challenges, but it can also reinforce the case for continuity and political stability and take the focus away from the party’s own problems, thereby cementing its expected return to power,” he says.

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