Six Charts on Myanmar's Economy in the Time of COVID-19

IMF News, July 7, 2020

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Myanmar is described as a "frontier economy" that experienced rapid growth in the 2000s, with GDP growth rates among the highest in Asia, but growth had already been slowing when the coronavirus shock hit in early 2020.
Officially recorded COVID-19 cases remain low: about 300 confirmed cases in a population of 54 million, possibly reflecting limited testing capacity.
The authorities implemented strict containment measures early, including travel restrictions, closure of land borders, and bans on mass public gatherings.

Early containment measures helped to flatten the curve of infections despite limited testing.
Social and economic effects could be significant given:
- an externally oriented economy;
- uneven social safety nets;
- a fragile healthcare system.
Nearly four out of five workers in Myanmar are employed in the informal sector, with limited access to social safety nets.

Key growth engines affected:
- Sharp decline in exports.
- Sharp decline in remittances.
- Sharp decline in tourist arrivals; tourism singled out as an affected sector.
Domestic economic activity constrained by containment measures, with disruptions affecting households and businesses, including in agriculture, which:
- comprises a fifth of the economy;
- accounts for over half of employment.
High uncertainty around short-term growth, reflecting the intensity and duration of containment measures and the evolution of external conditions.

Natural gas shock:
- Natural gas comprised 40 percent of exports and 20 percent of government revenues in fiscal year 2018/19.
- Global oil price collapse and lower gas prices have strained the current account and fiscal position.
Exchange rate and reserves:
- The kyat appreciated in contrast to regional trends due to a narrowed trade deficit; this appreciation trend had started to unwind.
- Myanmar’s foreign exchange intervention rule, adopted late last year, has facilitated accumulation of foreign exchange reserves, which remain inadequate.
- IMF emergency financing will help bolster reserves given uncertain pandemic duration, lack of market access, and heightened external and banking sector vulnerabilities.

IMF emergency financing of $356.5 million, along with external financing, the Debt Service Suspension Initiative, and continued capacity development, are intended to alleviate the impact of COVID-19 while establishing roots for more sustained and inclusive growth.
The government’s COVID-19 Economic Relief Plan aims at:
- minimizing the pandemic’s impact by stimulating the economy;
- boosting spending on health and social safety nets.
Social spending:
- Social spending, particularly on health, is expected to increase over the medium term, from a very low base compared to other countries.
- The government intends to raise cash and in-kind transfers to the most vulnerable and at-risk groups in all regions, including by leveraging digital payments.
Monetary and financial sector policy:
- Proactive monetary and financial sector policies will continue to support the economic recovery while remaining anchored on ensuring macroeconomic and financial stability.
Fiscal space and debt sustainability:
- The spending needed for urgent recovery measures, combined with revenue declines, will raise the fiscal deficit and pressure funding.
- Risks to debt sustainability are limited because both domestic and external public debt are relatively low, allowing a scaling up of lower cost external borrowing to support faster and more inclusive growth.

"about 300 confirmed cases"
population of "54 million"
"Natural gas comprised 40 percent of exports and 20 percent of government revenues in fiscal year 2018/19"
"a fifth of the economy" (agriculture)
"over half of employment" (agriculture)
"nearly four out of five workers" employed in the informal sector
IMF emergency financing of "$356.5 million"

By Jayendu De and Sanaa Nadeem, IMF Asia and Pacific Department, July 7, 2020.