Lead by World Bank’s country director, Mariam Sherman, the Bank presented its latest briefing on Myanmar Economic Monitor findings on January 28, virtually, to the selected group of UMFCCI (Union of Myanmar Federation of Chambers of Commerce and Industry) representatives in Yangon.
After opening remarks by both parties, World Bank’s representatives made their presentation to the UMFCCI leaders. Nearly thirty Myanmar business owners and senior executives, attended the event.
The Myanmar Economic Monitor report is already available on the World Bank’s website at the time of print. It is due for release at the end of January. During the introduction, the Bank highlighted three salient points:
1. The economy is estimated to be 30% smaller than what it could have been had there been no COVID or political conflicts.
2. Economy continued to be severely tested.
3. Inflationary pressures are creeping in, in recent months.It was followed by the presentation of the summary of the Economic Monitor. The World Bank report comprises of macroeconomic review of the current state of affairs as well as the survey results of 500 businesses. In terms of macroeconomics, the key findings are as follows:
– Signs of stabilisation are starting to become visible, yet there is still very low level of ongoing economic activities.
– Downside risk in on growth, remains high.
– The signs of mobility are proven by google mobility report, highlighting increases in general mobility across various sectors.
– The economy is still 30% below pre-COVID statistics.
– PMI (Purchasing Manager Index) in the manufacturing industry went down significantly, confirming a shrinking a manufacturing sector.
– Retail and wholesale sectors shows 50% decline in sales over the past one year.
– In terms of discretionary spacing, the Bank looked at motor vehicles sales, and the sales are significantly lower reflecting materially reduced discretionary spending power.
– For investment/divestment decisions, 50% of the firms surveyed were in investment suspension mode. 50% of the businesses have also stopped their business expansion plans.
– In financial sector, the banks’ balance sheets are significantly weaker, physical cash constraints still exist and digital payment requirements are in conflict with some sectors that still relies on cash transactions. For Microfinance institutions, they are facing liquidity constraints and reduced asset (loan book) quality.
– There was a sharp depreciation of Kyats in the past six months.
– Import prices increased mainly due to the fuel price increases, which in turn depended on crude prices and the exchange rates.
– Increases in retail food prices, as imported items become more dear. Locally manufactured items got more expensive too, due to input price increases.
– Incidents of poverty have doubled since pre-COVID times.
– For the year ended September 2021, the economy contracted by 18%. For the coming FY ending September 2022, the Bank expects the GDP to grow by 1%.
– Tax revenues as a percentage of GDP has also gone down; it was 7% of GDP in 2019/20 FY and 5% of GDP (lower base) in 2020/21 FY. Government revenues have gone down quite substantially.
– The Bank also expects Omicron to hit Myanmar in full within the next couple of months. The Bank also expects the duration to be much shorter and the magnitude of impact much lesser.
– The risk of continuing conflicts still exists.
– Out of the top four main GDP contributing regions: Yangon, Ayeyawaddy,
Sagaing and Mandalay, only Ayeyawaddy is not in conflict zone. Yangon and Mandalay are classified to be in red zone and Sagaing an even worse, in brown zone. Hence, the risks of escalating conflicts that can negatively impact the economic growth.
In the last part, the Bank represented the results of the survey of 500 firms, representing four major sectors of the economy: agriculture, manufacturing, retail and services.
The salient features are as follows:
– The average operating capacity is only 57%.
– Disruption in the input and raw materials supply remains a major issue.
– 64% of the firms are impacted by the Kyat depreciation.
– Probability to closure of the firm within the next three months have increased.
– 53% input price increase compared with last year.
– 45% input price increase compared with three months ago.
– 34% of the firms who previously regularly pay taxes have stopped paying taxes altogether.
The group ended the meeting with questions and discussion among the participants and the presenters.
