Home Insider Preparing for an Economic Upheaval – Part II

Preparing for an Economic Upheaval – Part II

A couple of weeks have passed since the time of the publication of part I. Since then many things significant to the current economic conditions have happened:

  1. As expected $ rate has skyrocketed, reflecting the relative strength of Myanmar economy.
  2. We have heard news of factories closing one by one, highlighted during an interview with the chairman of one significant industrial zone.
  3.  Domestic airlines some of which depends on foreigners arrivals have either been shut down or suspended. Statistics do not fare that well either; tourist arrivals have not even reached one million out of the targeted 4 million this year. Condo units are in surplus. Even through rental prices have gone down by nearly 50% since the hay days of 2013, lack of FDI means lack of tenants to pick up the excess supply in the market. Even Shaun Turnell stated there is simply no investments coming in from the West, during an interview with Bloomberg on July 9.

There is economic growth, yes. Yet, as we have said many many times prior,5-6% growth for Myanmar is simply not good enough. China is catching up with US now because for the past 25 years, their growth rate averages like 11-12% pa. We, as a developing country, simply cannot afford a single digit growth rate. Of course, Singapore’s GDP growth is around 3%; it is ok for them, as it is already a developed country. Statistics do not lie. We can argue opinions, but we cannot argue facts and stats. $ exchange rates, market sentiments, lack of investments, lack of FDIs, stagnant professional salaries, shutting down of companies are reflective of the economy right now and in the near future to come.

With the trade war looming between US and China, prices of consumer goods are expected to increase, causing cost push inflation all over the world. MM inflation rate will even increase further in the foreseeable future. With that there will be pressure to keep the interest rates high. The lower interest rates that businesses are demanding to boost local investments, is unlikely to materialise for at least till end of next year, because of that.

If we are to survive this crisis of confidence, the courses of actions we can take as individuals depend on the situation we are in:

  1.  If you are loaded with cash: It might be best to selectively purchase long term assets or businesses that generate revenues over long term. We are generally against purchasing land as land is plentiful in Myanmar and it is the infrastructure that demands higher prices of properties. We generally prefer property investments that generate income in the short and medium term yet, have upside capital appreciation potential in the long run. Property is all about location and excellent location at a reasonable price is always better than mediocre location at a cheap price. For acquiring or taking a minority or majority stake in businesses, there are only two things to look at; one having sustainable business model and two the integrity of the management.
  2. If you are a professional: High paying jobs may be a thing of the past in the near future. Prepare to put in extra work and extra time, to ensure you stay employed. Companies have been retrenching staff, as you probably would have read it in the news. Home prices are very reasonable now, so it might be worth while getting a reasonably-priced home now.
  3.  If you are loaded with loans, that you are finding hard to repay: There is no point hiding from creditors. You have to face them. Explain your current situation to them. Work out a plan that you can afford with them. Switch from high interest bearing borrowings to loans with reasonable interest. Alter your spending habits. You do not need a new car or a new phone or a new computer, right now. Avoid getting high interest bearing loans as the business might not do well enough in the near future to service the debt. Best of luck everyone!