Myanmar’s growth prospects shrink on resurgence of COVID-19

Two men walk at the Ayeyarwady COVID-19 treatment centre built inside Thuwanna Stadium in Yangon. Photo: Aung Htay Hlaing/The Myanmar Times Myanmar’s growth prospects shrink on resurgence of COVID-19

Stringent containment measures, an uncertain export outlook and strengthening of the local currency against the US dollar could delay Myanmar’s economic recovery into 2021 following a spike in the number of COVID-19 cases in mid August, a London-based research agency warned.

Fitch Solutions has cautioned that its growth forecast for Myanmar for fiscal 2020-21, projected at 5 percent compared to 2pc in fiscal 2019-20, is now at risk following “a resurgence of COVID-19 infections [which has] spurred an increase in containment measures, and this will delay economic recovery,” said Jason Yek, a senior analyst at the agency.

The latest report by Fitch Solutions indicated that restrictions on business operations, curfews, stay-at-home orders and an ongoing flight ban could worsen the labour market outlook and loss of income, hitting service-based industries like tourism hard. In Myanmar, tourism accounts for 4.6pc of GDP.

Exports are also at risk as the country’s major trading partners like Thailand, the EU and Japan continue to see their economies weakened by the pandemic. Myanmar’s garment manufacturing sector, which makes up a key portion of the country’s total exports, is likely to remain weak over the coming months, for example.

And while China, Myanmar’s largest trading partner, is on track for recovery, Mr Yek said the locking down of the border city of Ruili last week after the pandemic resurfaced suggests that Myanmar’s trade with China could slow for as long as cases continue to climb.

The strengthening of the Myanmar kyat against the US dollar, too, could take a toll on the country’s exports, making locally produced goods less attractive to foreign buyers.

“While we continue to expect the Central Bank to intervene to weaken the Myanmar kyat to support the export sector, the kyat [has been] trading at its strongest level against the USD since April 2018,” Mr Yek said.

With the coming November election now overshadowed by the surge in the number of cases, Fitch Solutions added that government spending would not be able to provide much support to local businesses.

As the pandemic situation is far from under control, many political parties have announced partial suspensions of campaign activities in virus-hit areas or switched to campaigning via digital means. This could mean less spending on campaign materials like posters, flags, among others, delivering a smaller boost to the economy.

The acceleration in COVID-19 infections across the country could also prompt major political parties such as the ruling National League for Democracy and the Union Solidarity and Development Party to shift their campaigning activities onto social media. That would provide less business to local SMEs and transfer the windfalls to foreign social media companies like Facebook.

Mr Yek added that uncertainty over the extent of control the winning party will have on the economy after the elections could limit investments by domestic enterprises as well as foreign businesses. This is because it could have an impact on policymaking and the policy direction going forward.

He added that if there is a postponement of the elections, there is likely to be a delay in prospective investment flows until investors get better certainty on the government’s policy stances over the coming term, which would push back Myanmar’s economic recovery.

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Source : Myanmar Times

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