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Myanmar coup weighs on battered economy

Myanmar protests
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One month after the coup in Myanmar, there is still no peace in the country. Hundreds of thousands of people have taken to the streets since the military took power on 1 February 2021, and the police have repeatedly used massive violence. Protesters reportedly have been shot in the head.

In the meantime, the ousted leader Aung San Suu Kyi, who has been under house arrest since the coup, has appeared in public for the first time. She was connected via video to her first court hearing. The 75-year-old is accused of allegedly violating import and export regulations, causing “fear and alarm” and violating a telecommunications law.

Meanwhile, the military regime insists that everything will remain the same under its leadership. “There will be no change in the foreign policy, government policy and economic policy of the country during the period [where] we are temporarily taking responsibility for the state. We shall continue on the same path as before,” said Commander-in-Chief Min Aung Hlaing in a televised statement.

After Myanmar coup – is the economy collapsing?

The economy in Myanmar is suffering even more since the coup – due to curfews and internet restrictions. In addition, the impact of the coronavirus pandemic weighs on the economy. Shops have been closed for months, hotels have stopped operating. Nearly 30,000 hotel employees were out of work by the end of December, according to the Ministry of Hotels and Tourism.

And the economic future of the country does not look bright. Fitch Solutions has lowered its forecasts for Myanmar’s economic growth to 2% from 5.6% for the 2020/21 fiscal year.

In addition, foreign direct investment (FDI) is likely to drop as a result of the coup. Myanmar had only opened up to foreign investors in 2011. Last year, the approval rate for FDI increased by 37% amid the pandemic, according to the Myanmar Times.

“Myanmar’s growth outlook depends heavily on a pipeline of key infrastructure projects and foreign direct investment, which could be delayed or cancelled altogether if sanctions are implemented, and if foreign entities decide to pull the plug amid elevated political risks,” Fitch Solutions said.

FDI accounted for an average of 4.5% of GDP in 2018 and 2019 and shifts could therefore have a “significant impact on the economy”.