Myanmar made significant progress in the 2010s, but the effects of the pandemic and a military coup in February 2021 are reversing those gains. Zlatko Nikoloski (LSE) says poverty rates could double by 2022

Nikoloski, Zlatko

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LSE Research Online

Myanmar	is	approaching	the	point	of	economiccollapseMyanmar	made	significant	progress	in	the	2010s,	but	the	effects	of	the	pandemic	and	a	military	coup	in	February2021	are	reversing	those	gains.	Zlatko	Nikoloski	(LSE)	says	poverty	rates	could	double	by	2022.Beginning	in	2011,	Myanmar	undertook	a	journey	of	triple	transitions—towards	peace	in	the	border	areas;	a	moveto	democratic	governance;	and	establishing	a	nascent	market-oriented	economy.	The	economic	reforms	and	tradederegulations	that	followed	resulted	in	rapid	growth	and	contributed	to	a	significant	reduction	in	poverty	rates.	In2017,	Myanmar	had	a	poverty	rate	of	24.8	percent	(using	the	national	poverty	line	as	the	benchmark),	down	from48.2	percent	in	2005.Despite	improvements	in	well-being,	vulnerabilities	have	remained.	One	third	of	the	population	was	alreadysubsisting	on	low	levels	of	consumption	that	put	them	at	risk	of	falling	into	poverty.	Moreover,	a	significant	share	ofhousehold	income	was	precarious,	mainly	generated	from	small	and	informal	business	activities.	Any	negativeshock	and	lack	of	appropriate	coping	mechanisms	could	easily	push	these	households	below	the	poverty	line	andeventually	lead	to	lasting	setbacks	in	achieving	the	Sustainable	Development	Goals	(SDGs).Reduced	incomes	and	minimal	coping	mechanisms	among	vulnerable	households,	in	the	wake	of	the	COVID-19pandemic,	have	set	the	stage	for	an	estimated	increase	in	the	poverty	rate	from	6	to	potentially	11	percentagepoints,	by	the	end	of	2020.	The	Household	Vulnerability	Survey	(2020)	shows	that	containment	measures	havebeen	particularly	harmful	to	small-scale,	family-owned	businesses,	further	increasing	the	vulnerability	of	thehouseholds	owning	them.	More	than	four-fifths	(83.3	percent)	of	households	have	reported	a	drop	in	income	sincethe	beginning	of	2020.	Evidence	also	pointed	to	disruptions	across	sectors	and	reduced	remittances	due	to	globaland	regional	lockdowns.Internally	displaced	people	at	a	camp	in	Rakhine,	Myanmar.	Photo:	Chris	Schuepp,	UNOPSThe	ongoing	political	crisis	will,	doubtless,	further	compound	the	socioeconomic	impact	of	the	pandemic,	reducingincomes.	In	the	worst-case	scenario,	nearly	half	of	the	population	of	Myanmar	(48.2	percent)	will	live	in	poverty(compared	to	the	24.8	percent	in	2017),	reversing	gains	made	since	2005.	If	the	situation	on	the	ground	persists,the	poverty	rate	could	double	by	the	beginning	of	2022.	By	then,	the	shock	from	the	crisis	will	have	resulted	insignificant	losses	of	wages	and	income,	particularly	from	small	businesses,	and	a	drop	in	access	to	food,	basicservices	and	social	protection.LSE Covid 19 Blog: Myanmar is approaching the point of economic collapse Page 1 of 2		Date originally posted: 2021-05-26Permalink: https://blogs.lse.ac.uk/covid19/2021/05/26/myanmar-is-approaching-the-point-of-economic-collapse/Blog homepage: https://blogs.lse.ac.uk/covid19/One	year	into	the	pandemic,	the	country	faced	a	further	shock	on	1	February	2021,	as	the	Myanmar	military	stageda	coup	d’état	to	overthrow	the	democratically	elected	government.	The	takeover	paved	the	way	for	violent	militaryand	police	crackdowns	against	protesters.	Within	a	period	of	two	months,	more	than	700	people	are	reported	tohave	been	killed	and	thousands	detained.	Moreover,	the	economy	is	facing	significant	risks	of	a	collapse;	in	theEast	Asia	and	Pacific	Economic	Update	(April	2021),	the	World	Bank	projected	an	economic	contraction	of	10percent	in	2021	due	to	a	combination	of	substantial	employment	and	income	losses,	government	relief	notmatching	earning	losses,	stimulus	not	offsetting	output	shortfalls	and	public	investment	not	being	accelerated	andscaled	up.	Recent	media	reports	have	highlighted	a	range	of	stress	points	emerging	concurrently	and	stiflingeconomic	activities,	including	a	virtual	standstill	in	banking	operations	since	1	February,	which	has	adverselyimpacted	business	operations	and	credit.Furthermore,	around	80	percent	of	Myanmar’s	trade	is	seaborne	and	the	United	Nations	Development	Programmeestimates	that	the	trade	volume	in	ports	has	dropped	by	between	55	and	64	percent	in	the	two	months	following	themilitary	takeover,	due	to	delays	in	government	clearance,	logistical	disruptions	on	account	of	political	unrest	andshipping	lines	temporarily	suspending	work,	amongst	other	factors.	All	these	reports	indicate	that	Myanmar	isapproaching	the	point	of	economic	collapse.Two	scenarios	(optimistic	and	pessimistic)	were	developed	to	project	the	effects	of	the	coup,	depending	on	theimpact	of	the	unfolding	situation	on	household	incomes.	Unlike	with	COVID,	where	the	shock	is	assumed	to	betemporary	in	nature,	in	both	scenarios	associated	with	the	takeover	we	assumed	a	protracted	downward	shift	inconsumption	patterns.	The	pessimistic	scenario	would	see	poverty	rates	almost	doubling	compared	to	the	MyanmarLiving	Conditions	Survey	2017	poverty	baseline—a	regression	to	where	the	country	was	in	2005.Women	and	children	are	expected	to	bear	the	heaviest	brunt	of	the	combined	impact	of	COVID	and	the	politicalcrisis.	The	effects	of	the	pandemic,	amplified	by	the	effects	of	the	overthrow	of	the	civilian	government,	are	likely	tolead	to	a	disproportionate	increase	in	urban	poverty.	Urban	areas,	where	most	of	the	income-generating	activities	ofthe	near	poor	are,	have	been	ground	zero	for	the	pandemic	and	the	focus	of	the	most	severe	crackdowns.	Childpoverty	is	expected	to	remain	high,	with	more	than	half	of	children	living	in	poverty	in	the	pessimistic	scenario.	Thiswill	further	exacerbate	the	intergenerational	transmission	of	poverty,	which,	coupled	with	potential	school	closures,may	have	a	devastating	impact	on	the	human	capital	of	the	next	generation.Finally,	the	compounded	shock	is	particularly	likely	to	affect	women	(with	female-headed	households	more	likely	tobe	poor	at	the	outset).	This	is	largely	due	to	the	types	and	sectors	of	female	employment	in	Myanmar.	Thisamplification	of	the	pre-existing	vulnerabilities	will	undoubtedly	have	significant	impacts	on	household	income	andwell-being,	and	on	access	to	and	benefits	gained	from	social	services,	particularly	in	health	and	education.Given	the	present	trends,	based	on	the	data	and	evidence	available	at	this	time,	Myanmar	is	at	risk	of	losing	over	adecade	of	hard-won	gains	in	the	fight	against	poverty.	Without	rapid	corrective	actions	on	economic,	social,	politicaland	human	rights	protection	policies,	these	scenarios	will	put	Myanmar’s	efforts	to	achieve	the	SustainableDevelopment	Goals	by	2030	well	out	of	reach.This	post	represents	the	views	of	the	author	and	not	those	of	the	COVID-19	blog,	nor	LSE.	It	is	an	edited	extractfrom	a	UNDP	report,	COVID-19,	Coup	d’Etat	and	Poverty:	Compounding	Negative	Shocks	and	their	Impact	onHuman	Development	in	Myanmar	(April	2021).LSE Covid 19 Blog: Myanmar is approaching the point of economic collapse Page 2 of 2		Date originally posted: 2021-05-26Permalink: https://blogs.lse.ac.uk/covid19/2021/05/26/myanmar-is-approaching-the-point-of-economic-collapse/Blog homepage: https://blogs.lse.ac.uk/covid19/

Myanmar is approaching the point of economic collapse

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Myanmar is approaching the point of economic collapse

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