In this interview with Channel NewsAsia, Dr. Jae Young Lee addresses questions on how the COVID-19 pandemic has hit Myanmar’s economy, and how the worsening US-China tensions can affect Myanmar’s growth.
Q1. Myanmar has seen a sharp decline in exports, remittances, and tourist arrivals, how would you describe the impact of the pandemic on the country’s economy?
The pandemic has weighed heavily on Myanmar’s economy across all sectors, especially after the second wave of infections in August.
With the decline in exports, remittances, and tourist arrivals, both consumption and investment have dropped sharply. At the moment, government spending is supporting the economy from the impact of the lockdown.
However, the external position remains relatively strong due to a stable trade balance and strong capital inflows. The Myanmar government has also successfully secured sizable foreign currency funding from international donors. This will provide some buffer to support the economy.
To date, Myanmar has reported almost 22,000 COVID-19 cases and more than 500 deaths. The key to its economic recovery will be the effective containment of the pandemic.
Q2. Do you think the pandemic derailed Myanmar’s recent progress in poverty reduction?
We think this pandemic may delay Myanmar’s efforts in poverty reduction, but less likely to derail it.
In low-income countries like Myanmar, poverty largely comes with a sizable informal sector in the economy, insufficient health care services, a lack of social safety nets, and so on. These challenges are not unique to Myanmar.
However, with a young and talented population, strong foreign investment inflows, and a progressive government, I am positive that Myanmar will resume its strong growth path when the pandemic is over.
Q3. What continues to be bright spots in the country? Which sectors have proven to be resilient during the pandemic?
It might be difficult to find bright spots during this pandemic. Before the second wave in late August, some sectors, such as agriculture, food & beverage, and garment manufacturing had held up quite well despite the pandemic. But the outlook seems to be uncertain at the moment due to the recent spike in COVID-19 cases. However, we believe that Myanmar will remain a driver of growth in the region in the medium term. Low labor cost, a young population, and a sizable market will ensure that Myanmar remains one of the most attractive investment destinations in the region.
When the pandemic subsides, several sectors, including garment manufacturing, telecommunication services, property, and tourism are expected to continue to attract domestic and foreign investment.
Q4. How would the China-US conflict affect Myanmar?
The conflict will affect the global economy and Myanmar is no exception. It boils down to two factors – first, the relocation of labor-intensive sectors to Myanmar due to the low cost of labor and second, the country’s strategic location.
The tariff war and tension between the United States and China while dampening global growth and trade, has also affected Myanmar’s exports as well as investments into the country.
At the same time, this situation is likely to accelerate the reallocation of some industries, especially those in labor-intensive sectors, from China to other Asian countries. Thanks to its young population as well as low labor cost, Myanmar is well-placed to benefit from this shift.
In addition, China has brought more investments to the country, helping to develop Myanmar’s infrastructure under its Belt and Road Initiative. Given the current circumstances, China might speed up this process.
In other words, it depends on how the Myanmar government can tap on these opportunities through relevant policies and reform.