Heavy damage expected for Myanmar’s economy after surprise coup
The February 1 military coup will take a significant toll on Myanmar’s economy which is already battered by the Covid-19 pandemic and erratic economic strategies left over by the ousted government.
Analysts predict that the coup will, first and foremost, have impact of foreign direct investment amid an unpredictable political situation.
US rating agency Fitch was among the first to react and slashed its real gross domestic product growth forecast for Myanmar’s financial year 2020/21 ending September 30 to two per cent, down from 5.6 per cent. It also cut its economic outlook for the following fiscal year 2021/22 to two per cent from six per cent.
“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 said.
Adding to the tensions is that the US has already said it is considering renewing sanctions on Myanmar which were eased in 2012 and completely lifted in 2016 by the Obama presidency.
Stock exchange index drops six per cent
When the Yangon Stock Exchange opened on February 3 after two days of closure, Myanmar’s stock index dropped almost six per cent, and the worst performer, industry park operator Myanmar Thilawa SEZ Holding which is dependent on domestic and foreign investment, dropped more than ten per cent.
Large foreign companies invested in Myanmar, such as Norway’s Telenor, Qatar’s Ooredoo, France’s Total and a number of Chinese, Singaporean, Japanese – including Toyota, Suzuki, Mitsui and Sumitomo – and Thai firms said that the coup has already put billions of dollars of foreign investment at risk.
Also not encouraging for foreign investors was the announcement that Yangon International Airport, the country’s main airport, will be closed until April 30, including for relief and aid flights.
It is understood that the country’s other two international airports in Naypyitaw and Mandalay also have been closed, but Mandalay seem to remain open for Covid-19 vaccine deliveries. Besides, all domestic airports have been closed and all domestic flights were suspended.
Companies are halting operations
Foreign direct investment commitments into Myanmar were worth $5.5 billion in the 2019/20 fiscal year, whereby real estate and manufacturing each accounted for about 20 per cent. The figure was already expected to be significantly lower this year due to the Covid-19 pandemic.
Chinese firms have reportedly begun to review their ongoing projects in the country, mostly related to energy, construction and infrastructure, and have suspended some of them, while some Japanese companies have also halted operations. Toyota, which was set to start production in the Thilawa Special Economic Zone in February, has put its plans on hold and said it was “monitoring the impact of the coup on our business.”
Thailand’s industry zones developer Amata said it has stopped work indefinitely on its $1-billion Smart and Eco City industrial park project in Yangon as a result of the coup.
The February 1 military coup will take a significant toll on Myanmar’s economy which is already battered by the Covid-19 pandemic and erratic economic strategies left over by the ousted government. Analysts predict that the coup will, first and foremost, have impact of foreign direct investment amid an unpredictable political situation. US rating agency Fitch was among the first to react and slashed its real gross domestic product growth forecast for Myanmar’s financial year 2020/21 ending September 30 to two per cent, down from 5.6 per cent. It also cut its economic outlook for the following fiscal year 2021/22 to...
The February 1 military coup will take a significant toll on Myanmar’s economy which is already battered by the Covid-19 pandemic and erratic economic strategies left over by the ousted government.
Analysts predict that the coup will, first and foremost, have impact of foreign direct investment amid an unpredictable political situation.
US rating agency Fitch was among the first to react and slashed its real gross domestic product growth forecast for Myanmar’s financial year 2020/21 ending September 30 to two per cent, down from 5.6 per cent. It also cut its economic outlook for the following fiscal year 2021/22 to two per cent from six per cent.
“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 said.
Adding to the tensions is that the US has already said it is considering renewing sanctions on Myanmar which were eased in 2012 and completely lifted in 2016 by the Obama presidency.
Stock exchange index drops six per cent
When the Yangon Stock Exchange opened on February 3 after two days of closure, Myanmar’s stock index dropped almost six per cent, and the worst performer, industry park operator Myanmar Thilawa SEZ Holding which is dependent on domestic and foreign investment, dropped more than ten per cent.
Large foreign companies invested in Myanmar, such as Norway’s Telenor, Qatar’s Ooredoo, France’s Total and a number of Chinese, Singaporean, Japanese – including Toyota, Suzuki, Mitsui and Sumitomo – and Thai firms said that the coup has already put billions of dollars of foreign investment at risk.
Also not encouraging for foreign investors was the announcement that Yangon International Airport, the country’s main airport, will be closed until April 30, including for relief and aid flights.
It is understood that the country’s other two international airports in Naypyitaw and Mandalay also have been closed, but Mandalay seem to remain open for Covid-19 vaccine deliveries. Besides, all domestic airports have been closed and all domestic flights were suspended.
Companies are halting operations
Foreign direct investment commitments into Myanmar were worth $5.5 billion in the 2019/20 fiscal year, whereby real estate and manufacturing each accounted for about 20 per cent. The figure was already expected to be significantly lower this year due to the Covid-19 pandemic.
Chinese firms have reportedly begun to review their ongoing projects in the country, mostly related to energy, construction and infrastructure, and have suspended some of them, while some Japanese companies have also halted operations. Toyota, which was set to start production in the Thilawa Special Economic Zone in February, has put its plans on hold and said it was “monitoring the impact of the coup on our business.”
Thailand’s industry zones developer Amata said it has stopped work indefinitely on its $1-billion Smart and Eco City industrial park project in Yangon as a result of the coup.
