Myanmar Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economical overview

Myanmar’s economy is divided into a legal and a hidden sector. The legal economy is characterized by agriculture and forestry, oil and natural gas extraction and light industry. In recent years, tourism and the construction industry have also increased in importance. The hidden sector is dominated by the smuggling of mainly precious wood, precious stones and opium. The illegal part of the economy is often judged to have the same value as the legal one.

After the 1962 military coup, all economic activities except agriculture were nationalized. The economy deteriorated sharply and after the new coup in 1988, some market reforms were initiated and some state monopolies abolished. However, the development was stymied by corruption, neglect and lack of investment.

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On average, economic growth has been high since the 1990s. It is primarily mining and oil and gas extraction that has increased in the commodity-rich country. Natural gas is Myanmar’s most important export product. But the development is from a very low level. In terms of GDP per capita, Myanmar is still one of Asia’s poorest countries. In the mid-2010s, one of four Myanmarians was considered poor.

The sanctions are abolished

The relative democratization of 2011 meant that most economic sanctions such as the US, EU, Canada and Australia directed against Myanmar were abolished. As a result, the tourist flow to the country increased and both foreign and domestic investments increased significantly. Previously, foreign investments had mainly been made in gas extraction, electricity production, forestry and mining. In addition, investors were frightened by corruption, inefficient administration and unclear laws. A new law from the fall of 2016 has facilitated new investments and opened more parts of the economy to private investors. The capital is now also invested in the telecommunications, transport and manufacturing industries.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including MMR which represents the country of Myanmar. Check findjobdescriptions to learn more about Myanmar.

Democratic developments have also meant that Myanmar is again granted loans and international aid. Previously, governments took large loans from China. In November 2012, the World Bank granted assistance worth $ 80 million and promised additional financial support in the form of loans. It was the first time in 25 years that Myanmar received financial support from the World Bank. In January 2013, the country was granted new loans to implement social and economic reforms: $ 512 million from the Asian Development Bank (ADB) and $ 440 million from the World Bank.

A long-term economic program under the auspices of the World Bank was launched in April 2015. The so-called Country Partnership Framework (CPF), with a value of $ 2.2 billion, has three priority areas: developing electricity generation, getting better government finances and expanding and modernizing the financial sector.. The program got off to a slow start due to extensive bureaucracy and lack of expertise among the ministers concerned. It was not until 2017 that discussions began with the World Bank on how the money would be used.

The military has great financial interests

In the 2010s, governments have also implemented a number of reforms aimed at reducing corruption, strengthening the currency, safeguarding the independence of the central bank and streamlining the tax system. But after decades of economic hardship during the military dictatorship, it may take a long time for Myanmar to catch up with neighboring countries.

The world ‘s transparency in the Myanmar economy has increased since the mid – 2010s, but it is still limited and the statistics are not entirely reliable. The hidden parts of the state budget concern the ministries that the military still controls, primarily the defense and home affairs. There are also no available economic statistics for the country’s 40 state-owned companies, such as the mining, oil and gas companies. Part of the income from these companies is likely to go directly to the military. The illegal sector of the economy is obviously not mapped out at all. People from the elite level of society are considered to be involved in the extensive smuggling. In the long run, crime in the economy may pose a threat to the country’s stability.

Other weaknesses are that shortages of electricity cause constant power cuts, transport routes and other infrastructure are working poorly, the banking sector is inefficient, Myanmar consumption is low and the labor force is poorly educated. In addition, the country has long been drawn with high inflation. The appropriations for the military have been extensive; As recently as just before the NLD government took office in April 2016, the military’s share of the state budget was 33 percent. However, Aung San Suu Kyi and her government have lowered military funding in favor of education and health care.

The official exchange rate on the exchange rate was long overvalued. In the parallel, private currency trading, a kyat could cost less than one hundredth of the official exchange rate. The overvalued currency favored imports at the expense of exports, and made a small elite who had import licenses very wealthy. In the spring of 2012, however, the central bank decided to let the Kyat float, which in a single stroke changed the rate from 6.4 Kyat for one dollar to over 800.

Decline in the corona pandemic traces

In June 2020, the IMF granted over $ 356 million to Myanmar in the form of a fast-track loan developed to support poor countries in the economic downturn caused by the corona pandemic. In Myanmar, the pandemic had led to sharply reduced tourism and significantly lower referrals from foreign-working Myanmarians. The loans would be used for healthcare costs, increased food distribution, and cash contributions to the country’s poorest households and to companies and farmers.