COVID-19 will lead to slower Myanmar economy: MIC

Myanmar should brace for the consequences of COVID-19 on the local and global economy, senior government officials and analysts say.

The Myanmar Investment Commission (MIC), which oversees investments in the country, said the economic slowdown caused by the virus outbreak is already being felt in other countries and will likely have an impact on Myanmar.

“It is certain that economic growth all over the world will decline. We cannot escape from such a situation and should prepare for how we deal with the situation. As the virus is now a global issue, there will be impacts that Myanmar will feel,” said MIC Secretary U Thant Sin Lwin.

“Some US$2.93 billion (K4.08 trillion) in domestic and foreign investments had already been approved in the first five months of fiscal year 2019-20 that began on October 1, and another US$1 billion worth is currently going through the approval process, so we may be able to hit our projected target of US$5.8 billion in investments. However, we cannot predict what will happen in the next six months,” U Thant Sin Lwin said.

“Major economies such as China and the US have announced large stimulus packages in attempts to counter the effects that the pandemic are having on businesses and stock markets, so the dramatic economic impact the virus has had around the world is bound to dampen the ability of businesses to invest in countries like Myanmar,” he added.

“Right now, many garment factories in Myanmar are already shutting down or limiting their operations due to a shortage of raw materials from factories that were closed by the virus outbreak in China. Such supply chain disruptions may factor into the decision-making process of investors looking at Myanmar,” U Thant Sin Lwin said.

“Additionally, a protracted slowing of the global economy would mean consumers are likely to limit spending on things like clothing, which in turn would cause investors to delay or abandon investments in garment factories in Myanmar,” he said.

Already the Yangon Region Investment Forum that had been set to take place this year has been postponed indefinitely due to travel restrictions imposed around the world to curb the spread of the virus.

The number of Chinese investors inquiring about opportunities in Myanmar has also decreased since the end of December when the virus started spreading.

Economist and researcher U Zaw Oo pointed out in an article about the effects of COVID-19 on Myanmar’s economy that 26pc of FDI in Myanmar is from China and four major projects under the Belt and Road Initiative – the Muse Cross Border Trade Zone, China-Myanmar Economic Corridor, Kyaukphyu Special Economic Zone, and New Yangon City Project – could be delayed or suspended depending on China’s economic situation.

While China is one of Myanmar’s top investors, Singapore, Thailand and Hong Kong are also important and since COVID-19 has affected those countries, the impacts on Myanmar will be huge, U Zaw Oo said.

“Chinese products may no longer be as cheap as they used to be. After COVID-19, China’s economic patterns may change. If local businesses face great economic changes from a neighbouring country, they should prepare for how to overcome them,” said economic analyst U Aung Ko Ko.

“To minimise the economic impacts due to COVID-19, tax reduction and interest rate cuts will be implemented. Soft loans and tax exemption will also be arranged for garment manufacturers, hotels and tourism companies, and SMEs. The w percent withholding tax on exporters will be exempted till the end of this fiscal year,” said State Counsellor Daw Aung San Suu Kyi in a televised address to the nation on March 16, regarding the government’s efforts to lessen the economic impact to the country.

“The business community welcomes the government initiatives and hopes that they can be put in place rapidly,” said U Soe Myint, the owner of a SME.

However, some observers say they can only watch and hope that Myanmar will be able to ride out the slowing of economy of major economies around the world.

“In the middle of a downturn, we’re making preparations based mainly on the welfare of the grass-roots. In doing so, we also have to consider the country’s finances. We can’t give much when the country does not earn much. We’ll be making plans to pay workers a suitable amount of money, if not their full salaries, from social welfare funds. I’m sure the government will also consider capital injections,” said U Thant Sin Lwin. – Translated