Myanmar crisis looms with warnings economy will shrink up to 20%

  • Myanmar
  • Monday, 12 Apr 2021

YANGON, April 12 (BLOOMBERG): With a tea shop right next to key protest zones in Myanmar's biggest city, Mr Soe is never quite sure whether he should keep the business open.

If protesters enter to evade authorities, the 43-year-old risks getting shot, arrested or having his property destroyed as the military and police hunt them down. But if he turns away fleeing demonstrators, he may face a backlash on Facebook and a boycott of his tea shop, among hundreds in Yangon that have long served as de facto community centres.

"Now we can't open our shop on a daily basis but we have to pay regular rental fees, municipal fees, labour wages," said Mr Soe, using only his first name because of concerns for his personal safety. "Many tea shop owners in Yangon are not sure how long they'll be able to survive if this crisis continues."

Small businesses like Mr Soe's are on the frontlines of an economy now seemingly in free fall after a group of generals seized power on Feb 1. The junta has killed at least 614 civilians since then, driving away foreign investors as Western nations put on new sanctions.

Their opponents in the Civil Disobedience Movement, meanwhile, are pushing to tank the economy to deprive the military of financial resources.

Shipping lines have suspended operations as truck drivers strike, leaving cargo containers trapped at the ports. Restrictions on cash withdrawals have businesses struggling to pay employees.

The military has restricted Internet access, making it harder to reach customers. And thousands of civil servants aligned with the protesters are refusing to work, leaving areas with limited public services.

Altogether it amounts to a speedy erosion of the economic gains Myanmar reaped after investors rushed in a decade ago following a shift toward democracy.

An economy that averaged growth rates of more than 6 per cent over the past 10 years - more than doubling gross domestic product - is now projected by the World Bank to shrink 10 per cent in 2021, by far the worst in Asia as countries rebound from a pandemic-induced slump.

"We are deeply concerned," Mr Aaditya Mattoo, the World Bank's chief economist for Asia, said in an interview. "A 10 per cent contraction in growth for a poor country seems to me disaster enough already. And when I add to it all the other costs, which have an impact on long term growth, I think we have a pretty dismal scenario."

Some analysts are expecting things to get even worse: Fitch Solutions is projecting a "conservative" 20 per cent contraction for the 2020-21 fiscal year. It said this month the rising death toll combined with increased social instability means "all areas of GDP by expenditure are set to collapse."

"There is no worst-case scenario in the economy which we can rule out," Fitch said.

At the moment in Yangon, there's still no sign of a humanitarian crisis. Supermarkets, convenience stories and small shops still have plenty of food, and prices of rice and other staples are relatively stable. But signs of distress are popping up, like long queues outside banks and ATMs after some banks capped daily withdrawals from ATMs at 200,000 kyat (S$190). Demand for gold and US dollars is rising.

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economy , collapse , protest , military


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