Myanmar’s economy to contract by 1% this year on conflict, floods: World Bank

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Myanmar’s economy is expected to shrink by 1% this year as war and disastrous flooding compound an already dire financial crisis, the World Bank said on Wednesday, as it downgraded its outlook for growth from a previous 1% increase in gross domestic product (GDP).

Myanmar’s economy has been in freefall since the military seized power in 2021, toppling an elected government led by Aung San Suu Kyi, squandering progress made over a decade of tentative reforms and scaring off many investors and tourists.

Opponents of the junta have taken up arms around the country and disastrous floods triggered by a typhoon hit several regions this year.

“The recent natural disasters and ongoing conflict have severely impacted Myanmar’s economy, with households bearing the brunt of rising prices and labor market weakness,” said Melinda Good, World Bank country director for Thailand and Myanmar.

More than half of Myanmar’s 330 townships are in active conflict and the U.N. estimates that 1.5 million people have been displaced since October 2023, increasing the total number of internally displaced people to 3.5 million, or about 6% of the population.

In just one example of the impact of the war, Singapore’s Sembcorp Industries suspended operations at its Myingyan Independent Power Plant in Mandalay in August because of nearby fighting.

“Conflict-related disruptions to trade and logistics, sharp kyat depreciation, and the stepped-up enforcement of import licensing rules have led to increasingly severe shortages and higher prices,” the World Bank said.

“Persistent power restrictions have created further challenges for businesses and households,” it said.

Natural disasters had also hit agriculture with output expected to fall over the next financial year, the World Bank said.

“Estimates .. indicate that crop production is likely to decline in the FY 2024/25, with flooding directly damaging rice paddies, pulses, and oilseeds, while triggering additional shortages of key inputs including fertilizer and seeds,” it said.

Households were bearing the brunt with 14.3 million people, or 25% of the population, experiencing acute food insecurity as of October, up from 10.7 million people a year earlier, driven mainly by food price inflation and supply shortages, the bank said.

Overwhelming challenges

In the strife-torn central region, a resident said the war and poverty made things very tough.

“There’s danger from both the military and life in general,” said the resident of Ye-U town who declined to be identified for safety reasons. “There are no jobs anymore but it’s not just hunger that can kill us.”

“We can’t raise animals or grow things well … challenges for farmers are overwhelming.”

In the Dagon Industrial Zone in the main city of Yangon, which once carried the hopes for a booming garment sector, factory operations are more often suspended because of power shortages.

“We don’t have electricity, so workplaces generally aren’t doing very well,” said one manufacturer who also declined to be identified for security reasons.

“When we do get electricity, it’s very little … two days a week we can run the factory but the other three we have to take off.”

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The World Bank said the risks to an already bleak outlook “are tilted to the downside” after the expected 1% contraction in GDP in the year ending in March.

“A further escalation in conflict, including in the run up to possible elections in 2025, or another severe natural disaster could depress output across a range of sectors,” said.

“Even assuming no further escalation in conflict, growth is expected to remain subdued.”

Translated by Kiana Duncan. Edited by RFA Staff.