Myanmar’s Economy Projected to Contract 8.5% in 2021, Causing Thailand’s Cross Border Exports to Shrink for Fifth Consecutive Year (Business Brief No.3920)

Amid positive signs seen in the global economic recovery due to concerted efforts of many countries in combating the COVID-19 pandemic via rolling out COVID-19 vaccines, which have allowed them to ease lockdown restrictions, Myanmar is experiencing political turmoil at home. The country's image in the eye of Western nations is at peril after the US suspended the Trade and Investment Framework Agreement (TIFA) that it had entered into with Myanmar in 2013 on March 30, 2021. This means that its generalized system of preference (GSP) granted by the US was automatically rescinded, putting substantial pressure on Myanmar. Moreover, it is at risk of being stripped of the EU's 'Everything But Arm' program.    

Within only two months after Myanmar's army seized power from the government on February 1, 2021, there was an emergence of the Civil Disobedience Movement (CDM). Its hostility towards the army has intensified, and there are no signs of it easing during 1H21. Instability in Myanmar has not only stalled its economic activity, but caused all economic drivers to slow down faster than expected. We at KResearch project that Myanmar's economy will contract approximately 8.5 percent (or within a range of 9.8-7.2 percent) during 2021, though this will rest primarily on the country's economic and political developments. If instability in the country does not become much worse and the relevant authorities can ensure that economic and political conditions in 2H21improve over those seen in 1H21, it is expected that its economy may shrink only 7.2 percent. However, if instability there persists until the year-end, its economy will likely contract 9.8 percent due to the protracted economic stagnation and substantial decline in investment.

• As Myanmar's economy has been undermined by many factors since early 2021, including the COVID-19 pandemic and political instability, Thailand's cross-border shipments to Myanmar reverted to a steep contraction of 21.4 percent YoY in February 2021, due partly to the resurgence of COVID-19 and the impact of instability in Myanmar, which dampened demand for most products. KResearch is of the view that although instability in Myanmar may affect border trade for a time, cross-border freight transport between Thailand and Myanmar remains intact somewhat because Myanmar is heavily dependent on many Thai products in the wake of global isolation. Moreover, there has been substantial hoarding of Thai products in some areas due to concern about political stability in Myanmar earlier. However, as purchasing power and economic conditions are projected to weaken during the remainder of 2021, ​Thailand's cross-border shipments to Myanmar will likely shrink 6.0 percent to THB81,890 million in 2021, representing a contraction for the fifth consecutive year (or (-)8.0 percent if Myanmar's economy deteriorates throughout 2021 or (-) 2.9 percent if the situation in Myanmar improves during 2H21)