Executive Summary

Myanmar’s economy continues to face significant challenges in 2024. Economic activity has been constrained by elevated conflict, increased macroeconomic volatility, and a challenging business environment. In addition to its ongoing impacts on household livelihoods and agricultural production, conflict continues to disrupt land border trade with China and Thailand, as well as domestic supply chains. The announcement of mandated conscription in February 2024 has intensified migration to rural areas and abroad, leading to increased reports of labor shortages in some industries. Moreover, since October 2023 more than one million people have been displaced by conflict, bringing the total number of internally displaced persons (IDPs) to 3.1 million as of early June. Kyat depreciation and lack of access to foreign currency and import licenses have led to persistent inflation and shortages of essential imported inputs. Electricity outages have worsened, compelling firms to rely on expensive diesel generators, thereby increasing production costs. About 33 percent of firms surveyed by the World Bank in April reported power outages to be their primary challenge, up from 12 percent in September.

Recent indicators of economic activity have been subdued. GDP is estimated to have risen by just 1 percent in the year ended March 2024, remaining around 10 percent below pre-pandemic levels. In the April 2024 round of the World Bank Firm Survey, firms reported operating at 65 percent of their capacity on average, a pick up from September 2023 but still 10 percentage points below levels a year earlier. The services sector, particularly retail and tourism, has suffered due to high inflation and reduced consumer spending power. Though there has been some shift toward sales of domestically produced products, retailers continue to face significant stock shortages. The number of international tourists also remains significantly below pre-pandemic levels and has weakened further since the beginning of the year, impacting the hospitality and related industries. As of March 2023, the manufacturing purchasing managers’ index had contracted for six consecutive months, as firms reported a drop in output and new orders, though these indicators subsequently improved in April and May. The agricultural sector has displayed signs of resilience, largely driven by increased input use and improvements in rice and other crop yields. However, limited access to credit and conflict-related disruptions to farming activities continue to weigh on agricultural production.

Reflecting anemic GDP growth, labor markets remain very weak. Following a marked deterioration in labor market conditions between 2017 and 2022—in terms of participation, employment, and formality—there has been only partial improvement over the year to end-2023.1 According to the World Bank’s Myanmar Subnational Phone Surveys (MSPS), the employment rate rose by 2.3 percentage points between the end of 2022 and the end of 2023, but remains 7.4 percentage points below 2017 levels. Meanwhile, the estimated adult unemployment rate rose from 6.7 percent to 8.1 percent over the year to end-2023. Measures of job vacancies – an indicator of demand for labor – have plateaued at well below 2020 levels. At the same time, some areas and industries have seen a reduction in labor supply, particularly in early 2024, due to labor movements within the country and across borders in response to conflict and fear of conscription. This combination of weakness in demand and supply has meant that real-time indicators of employment have deteriorated in recent months: in March 2024 the manufacturing purchasing managers’ employment index (an indicator of the direction of month-on-month changes in employment at the firm level) fell to its lowest level since 2021, and as of May employment in the manufacturing sector had contracted for each of the last 12 months.

There has also been a significant decline in trade, driven in large part by disruptions at key land border posts. In the six months to March 2024, merchandise exports fell by 13 percent and imports fell by 20 percent compared to the same period a year earlier. Excluding natural gas, exports through land borders declined by 44 percent, while manufactured exports – largely garments and natural gas – also fell sharply. Imports via land borders declined by half, accounting for 71 percent of the decline in overall imports. Trade with China and Thailand has been blocked or restricted at those border posts that have fallen under the control of resistance groups, but there is some evidence of redirection towards alternative land gates and sea trade. Import and foreign exchange restrictions, weaker domestic demand, and a shift toward domestic production also contributed to the decline in imports. Due to the large decline in imports, the merchandise trade deficit narrowed to nearly zero in the six months to March 2024.

The market exchange rate has depreciated sharply since the beginning of the year. The kyat has depreciated by about 20 percent against the US dollar on parallel markets since the end of 2023 (as of early June the exchange rate was around 4300 kyat per dollar). The spread between the official fixed reference rate and the parallel market rate tripled over the year to end May 2024, to more than 50 percent. Multiple exchange rates are in effect between the official reference rate and the market rate, with persistent shortages of foreign currency at non-market rates. In addition to CBM sales of foreign currency, vexchange rates. Several of have further reduced the availability of foreign have been deployed in an attempt to maintain a balance between foreign exchange supply and demand, including foreign currency surrender requirements, import license restrictions controls on non-trade related offshore payments, promotion of the use of foreign currencies other than US arious administrative measures barter transaction arrangements, dollars, and crackdowns on foreign exchange dealers not complying with regulated these measures (and the actions taken by businesses in response) currency, exacerbating depreciation pressures on the parallel market.