The official kyat reference rate has depre- ciated by around a quarter against the US MYANMAR Key conditions and dollar since January 2021, and the spread between the official reference rate and the challenges rates available on the market has increased sharply, indicating persistent exchange Table 1 2021 A further wave of COVID-19 cases has in- rate pressures. CPI inflation picked up to Population, million 54.8 creased health risks and economic chal- almost 10 percent (year-on-year) in Octo- GDP, current US$ billion 64.3 lenges. Reported COVID-19 cases rose ber 2021, reflecting exchange rate depreci- GDP per capita, current US$ 1173.4 rapidly in February before declining in ation, supply constraints and increases in a 14.9 Lower middle-income poverty rate ($3.2) March. Although this recent outbreak ap- transport costs. Local fuel prices have a 54.3 pears to have been less severe than initially more than doubled over the past year, in Upper middle-income poverty rate ($5.5) b 112.3 expected, testing has remained limited and part due to increases in global oil prices. School enrollment, primary (% gross) Life expectancy at birth, years b 67.1 there has likely been significant underre- Surveys indicate that rising input costs are Total GHG Emissions (mtCO2e) 219.0 porting of cases. Moreover, the pandemic a severe constraint to production across continues to pose health and economic the economy. In recent weeks, electricity Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017), 2011 PPPs. risks given that only 38 percent of the pop- outages have also become increasingly fre- b/ WDI for School enrollment (2018); Life expectancy ulation was fully vaccinated as at the end quent and long-lasting, negatively impact- (2019). of February and treatment options are dif- ing households and critically affecting the ficult to access. ability of businesses to operate. Indicators of conflict suggest that the se- Following the estimated 18 percent con- curity environment has deteriorated traction in FY21, GDP is projected to ex- markedly since mid-2021, including in pand by 1 percent in FY22, consistent states and regions which have historically Recent developments been relatively peaceful. At the same time with some stabilization in the economy as demand has fallen, firms have needed While some real-time indicators have im- but at a very low level. A deteriorating to devote scarce resources to dealing with proved in recent months, they remain con- security environment, elevated inflation- security-related operating constraints and sistent with a much lower level of economic ary pressures and worsening power out- ensuring the safety of their staff and cus- activity than prior to the February coup. tomers. Logistics have been hampered by Mobility has recovered to pre-coup levels ages are exacerbating the severe supply- an increase in the presence of security after falling 70 percent below pre- and demand- side constraints associated checkpoints and roadblocks, increasing COVID-19 baseline levels in July, though with the aftermath of the February 2021 transport times and costs. The ongoing mobility at retail, recreation and transport military coup. Livelihoods remain under threat of conflict has also affected busi- venues remains 30–40 percent below pre- severe strain and poverty is expected to nesses’ confidence, and appetite to hire COVID-19 levels. Manufacturing survey staff and invest. data indicate that the rate of contraction in have more than doubled in 2022 com- An additional rise in fuel prices due to the output, employment, and new orders has pared with pre-COVID levels. conflict in Ukraine is exacerbating the severe eased since mid-2021. But the Purchasing supply-side constraints already affecting Managers’ Index dipped in early 2022 due agricultural producers and manufacturers. to conflict-related disruptions, raw material FIGURE 1 Myanmar / Real GDP growth and contributions to FIGURE 2 Myanmar / Manufacturing purchasing managers’ real GDP growth by sector index (PMI) / Mobility (month average) Percent, percentage points PMI Index value Percent deviation from baseline 10 55 -20 50 -30 5 45 -40 0 40 -50 -5 35 -60 -10 30 -70 -15 25 -80 20 -90 -20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 2018 2019 2020 2021f 2022f Headline_PMI Retail and recreation (rhs) Agriculture Industry Services Real GDP growth Public Transport (rhs) Sources: Ministry of Planning and Finance and World Bank staff estimates. Sources: Google COVID-19 Community Mobility Reports and IHS Markit. MPO 1 Apr 22 shortages, higher input prices, and elec- of some basic food items increasing the associated rise in global gas prices tricity outages. sharply, and agricultural production con- would have a positive impact on govern- Agriculture and manufacturing exports strained by higher input costs, in Decem- ment revenues and overall economic ac- have picked up in recent months. Some ber the UN estimated that some 12 million tivity in Myanmar. But the positive GDP border crossings with China have re- people (about 22 percent of the popula- impacts of higher gas prices are unlikely opened – after closing in mid-2021 due to tion) are moderately food insecure in to benefit most of the population and will the third wave of COVID-19 – although Myanmar, with an additional 1.2 million likely be more than offset by the nega- cross-border trade remains subject to re- severely food insecure. tive GDP impacts of higher fuel prices on strictions. Foreign direct investment (FDI) other sectors. commitments have risen modestly since Downside risks are elevated. A further es- mid-2021, as has the number of company calation in conflict would reduce demand, registrations. But several large internation- Outlook disrupt logistics and supply chains, and in- al firms have announced their withdrawal crease the constraints faced by businesses. from Myanmar over the same period. Following the estimated 18 percent con- If recent sharp increases in global oil prices Economic deterioration continues to dam- traction in FY21, GDP is projected to in- persist, it would exacerbate broader infla- age livelihoods, which for many have been crease by 1 percent in FY22, consistent tionary pressures, stretching household under severe strain since early 2020. Many with some stabilization but at a very low budgets further and increasing firms' households are experiencing declines in level. Continued export demand for gar- costs. Continued power outages would se- real income due to employment losses ments and a modest resumption of con- verely restrict the operating capacity of and/or reduced work hours and wages, struction work are expected to support businesses, with higher fuel prices making combined with higher prices. While there overall activity. On the other hand, the the use of back-up generators less viable. is considerable uncertainty around these agriculture sector is expected to contract Additional waves or new variants of estimates, micro-simulations imply that due to credit and logistics constraints and COVID-19 remain a risk, particularly in the share of Myanmar's population living increases in fuel and fertilizer prices, the context of still low vaccination rates. A in poverty in 2022 (using national poverty which will be further exacerbated by the further contraction in economic activity is lines) has more than doubled compared to conflict in Ukraine. With gas export earn- possible in FY22 to the extent that one or levels before COVID-19 hit. With the price ings of around 5 percent of GDP in FY21, more of these downside risks materialize. TABLE 2 Myanmar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2017 2018 2019 2020 2021e 2022f Real GDP growth, at constant market prices 5.8 6.4 6.8 3.2 -18.0 1.0 Real GDP growth, at constant factor prices 5.8 6.4 6.8 3.2 -18.0 1.0 Agriculture -1.5 0.1 1.6 1.7 -12.5 -3.2 Industry 8.7 8.3 8.4 3.8 -20.3 3.3 Services 8.1 8.7 8.3 3.4 -18.9 1.4 Inflation (Consumer Price Index) 4.7 5.9 8.5 5.8 3.6 10.0 Current Account Balance (% of GDP) -3.1 -4.7 -2.8 0.1 -2.7 0.7 a Fiscal Balance (% of GDP) -2.7 -2.9 -3.7 -6.6 -8.8 -8.0 Debt (% of GDP) 34.4 38.4 37.5 41.6 57.2 62.5 a Primary Balance (% of GDP) -1.3 -1.7 -2.4 -5.2 -7.0 -6.6 GHG emissions growth (mtCO2e) 3.9 0.7 0.3 -0.7 -5.1 0.1 Energy related GHG emissions (% of total) 14.7 15.1 15.4 15.0 12.9 12.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Fiscal balances are reported in fiscal years (October 1st -September 30th). MPO 2 Apr 22