Myanmar’s economy in 2024 continued to struggle with slow growth, high inflation, increasing poverty, and declining real wages. Its near-term economic prospects are weak, weighed down by conflict, outmigration, uncertainty, and State Administration Council (SAC) policies that extract from the real economy to resource the regime.
ECONOMIC OVERVIEW
Myanmar’s economy in 2024 continued to struggle with slow growth, increasing poverty, high inflation, and widespread disillusionment with military rule. Since the 2021 coup, Myanmar’s economic performance has been the weakest in Southeast Asia. Real GDP is estimated to decline by 1% in FY24/25, another poor annual performance for an economy that has not yet recovered from the 18% drop in GDP post-coup. Growth was weakest in the agricultural sector, at -4% per year in FY24/25, after 2% growth the year prior. Industry and services have been flat, with no growth projected in the current fiscal year.
After a decade of steady poverty reduction in the 2010s, poverty rates have risen significantly under the State Administration Council (SAC). 77% of Myanmar households are poor or near-poor, according to the UNDP, up from 58% in 2017. This increase is due to the combined effects of COVID and the coup. However, unlike other countries in Southeast Asia, poverty rates in Myanmar have continued to climb, even after the end of the COVID pandemic.
Increasing poverty rates are at least partly driven by inflation, which has risen significantly due to the SAC’s high level of money printing, amongst other factors. The opposition National Unity Government (NUG) claimed in June 2024 that the regime had printed 30 trillion kyat since the coup. Data from the SAC shows that inflation peaked at 35% in the fourth quarter of 2022, and remained high in 2023, averaging 28%. Inflation has been strong for food items and transport, but lower for some other non-food items. Other data echo the rapid growth of prices. The International Food Policy Research Institute, for example, found that the cost of a typical diet has nearly tripled, from 875 kyat per person per day in June 2020 to 2,280 kyat per person per day in March 2024. Prices for some key goods, including rice, have risen more quickly. Prices of emata (a commonly consumed variety of rice) increased 220% between January 2021 and June 2024.
Wage workers have been the hardest hit by the post-coup economic decline. In the last year, inflation-adjusted wages for urban construction workers fell 14 percent, and 4 percent for rural agricultural workers. Inflation-adjusted wages in other sectors, such as garments, have also fallen. Nominal monthly wages at H&M factories increased by 22% from January 2021 to December 2023 – from 203,000 MMK to just 247,800 MMK, despite high inflation. Largely because of these inflation-adjusted declines, households of wage workers are highly vulnerable to hunger and poor diet.
Myanmar’s labour market has been roiled by growing outmigration, which has become more prominent since the SAC announced the implementation of the conscription law in February 2024. This contributed to high levels of quits and labour shortages as well as a consequent wage growth – all of which have affected businesses. The share of businesses reporting that employees resigned due to migration hit 28% in April 2024, up from 11% one year earlier. The number of Myanmar migrants in other countries vary, though estimates from Thailand – the largest host – exceed 2 million (this estimate predates the heightened outmigration after announcement of the conscription law). Another estimate suggests that nearly one-fifth of Myanmar’s population has left their home communities due to economic hardship or conflict, reducing the working-age population and lowering productivity. This outflow includes many skilled workers, constituting a brain drain that is one of many factors that make attracting new foreign investment to Myanmar difficult.
Myanmar’s trade initially rebounded in 2022, thanks to all-time high exports driven by a depreciating currency, amongst other factors. However, this bounce was short-lived, and trade fell in 2023. Exports declined by about $4 billion, and imports by about $1 billion. This was partly due to heightened conflict, including trade-related disruptions caused by Operation 1027, and global trends. Garment exports were down significantly, mirroring declines seen in other garment exporting countries. Trade – especially border trade – continued to weaken in 2024. Exports via land borders in the second half of FY23/24 were down 27%, while imports were down 50%.
Myanmar’s financial sector remains in a weak state, with confidence in the currency and the banks at low levels. In the immediate aftermath of the coup, there were runs on banks, which led the SAC to limit the amount of funds depositors could withdraw. Liquidity crunches returned in July 2024, and withdrawals were again limited, to between 1 and 2 million kyat ($208 to $416 USD). Banks have also been affected by the forced conversion of foreign exchange or forex into kyat and below-inflation interest rates. These factors have led to a notable decline in inflation-adjusted deposits, and a decline in credit as a percentage of GDP. Myanmar’s microfinance sector continues to contract, falling by about one million clients in 2023, though there is significant unmet demand for loans. The share of microfinance loans at least 30 days past due was 26% at the end of 2023.
While Myanmar’s licit economy struggled, informal and illicit economic activity has grown significantly. The growth in informal economic activity is often driven by regime policies that incentivise informality or make formality uneconomic or simply impossible. However, much of this growth, like in informal beverage imports to Myanmar, presents no meaningful security or other threat; instead, it reflects the coping strategies of Myanmar’s people. The growth in the illicit economy, on the other hand, presents a more significant threat. While accurate estimates are impossible to obtain, numerous indicators suggest that Myanmar is now amongst the world’s largest bases for illicit activities. It is the world’s largest producer of opium and one of the biggest producers of synthetic drugs. It is also home to a growing number of scam centres. Along with Cambodia and Laos, Myanmar’s scam centres are responsible for $39 billion in stolen funds.
While accurate estimates are impossible to obtain, numerous indicators suggest that Myanmar is now amongst the world’s largest bases for illicit activities. It is the world’s largest producer of opium and one of the biggest producers of synthetic drugs. It is also home to a growing number of scam centres.
ECONOMIC GOVERNANCE: NEW ACTORS, NEW MOTIVATIONS, NEW RULES
Myanmar’s economic performance in 2024, and since the coup, has been shaped by important changes in the actors that exert governance authority over economic activity; their motivations for governance of economic activity; and the policy and regulatory approaches they take to achieve their goals. The coup itself was a dramatic change in governance actors, with the Myanmar military taking over the civilian bureaucracy from the elected National League for Democracy (NLD). However, since Operation 1027 especially, the areas under SAC control have contracted as non-state groups have expanded their military and administrative control. In Rakhine State, for example, the SAC has cut key services necessary for economic activity – including electricity, internet and financial services – while its administration contracted due to the increased territorial control of the Arakan Army. The economic governance approach of non-state groups such as the Arakan Army is increasingly important not just for their areas, but for the country’s economy as a whole because they control key trade routes.
The SAC’s primary motivation for economic governance is fundamentally different from the NLD’s. Its focus is the extraction of resources for its own survival, effectively turning Myanmar into a “war economy”. The SAC employs coercive measures to mobilise resources to ensure its own survival and continued political primacy. It also adopts economic policies that are primarily conflict-oriented, for example, the repeated use of blockades in Rakhine State to prevent essential goods from reaching civilian populations. However, this approach does not appear to be well-planned, and instead is characterised by frequent reactionary and unpredictable changes in policies and regulations. The SAC is suffering from a gradual erosion in its ability to govern.
The SAC’s primary motivation for economic governance is fundamentally different from the NLD’s. Its focus is the extraction of resources for its own survival, effectively turning Myanmar into a “war economy”.
The SAC’s shifting economic approach includes an increasing focus on import substitution and the agriculture sector. This shift is partly driven by ideology, but perhaps more so by necessity – forex for imports is limited, because of the regime’s increased forex demands for conflict-related uses as well as the widespread efforts of Myanmar’s people to keep their forex far from the SAC. Efforts to bolster agriculture include Min Aung Hlaing’s exhortations for domestic investors to invest in farming and animal breeding, as well as price controls for agricultural inputs such as fertiliser. The regime also directs limited foreign exchange to agricultural imports in an attempt to support the sector.
The regime’s economic approach relies heavily on administrative controls and state direction, while relegating market signals. The SAC has adopted forex controls which force exporters, migrants and others to convert incoming remittances at artificially low rates. The SAC controls who can access this forex, and while it retains some share of it, the regime directs the rest of this forex to importers, many of whom bring in key commodities. This allows them to import and sell them at an artificially low price. The regime has fixed (or attempted to fix) prices for key commodities, including rice, cooking oil, fertiliser, fuel, and others. However, these prices are often below market rates, and unless supported by underpriced inputs, are not economically viable in many cases. The SAC has taken draconian measures, including arresting business owners such as forex or gold dealers, to force compliance with its dictates, especially those related to regime-determined exchange rates or reference prices.
While the SAC’s control has been shrinking, other governance actors have been expanding their reach. Non-state groups have greatly varying levels of experience and capacity for economic governance. Some groups, such as the Karen National Union (KNU), have engaged in forms of economic governance for decades, though mostly at the local level. The KNU has a tax schedule that dates back decades; an economic committee that, amongst other things, registers businesses and resolves disputes; and a land registration authority that, with the assistance of local NGOs, has demarcated over a million acres of land. Other non-state groups are newer, and have limited experience. Because of the sheer number of actors, there is a diversity in approaches to governance. There is also a lack of information about the economic governance approach of these groups, and the economic activities taking place in areas under their control; very few non-state organisations collect or publish regular economic policies or statistics.
While the economic governance approaches of non-state groups vary, one area where almost all groups are active is in taxation. Taxation is an important revenue source for many groups, though often not the only source. For example, the Arakan Army has stated that taxes on households and businesses are amongst its largest revenue sources. Some groups have been adopting tax-related policies. The MNDAA, for example, has told soldiers not to levy taxes on individuals or entities in Lashio while under martial law. The People’s Revolutionary Alliance, Magwe, has adopted a basic public financial management policy of using 70% of taxes collected in the region towards public services and administration. Non-state groups have also announced and are implementing other types of economic governance policies. The Arakan Army has pledged to protect and ensure smooth operations for all FDI that benefits Rakhine. The MNDAA has committed public funds to a conflict reconstruction programme, paying 30% of reconstruction costs for private homes in Lashio that were damaged in the conflict.
Displaced residents work in an illegal poppy field in Pekon Township, on the border of Karen State and southern Shan State in Myanmar, on 10 February 2025. (Photo by AFP)FOREIGN BUSINESSES SINCE THE COUP
Foreign businesses have responded to the changing post-coup economy in various ways. Some have left the country due to deteriorating business performance, while others left due to sanctions-related issues. Many foreign businesses including Coca-Cola and Heineken continue operating in Myanmar. Some of them remain because commercial performance is good, while others do it because of the country’s long-term potential. A few companies remain simply because they are unable to fully withdraw. The heightened uncertainty of operating in post-coup Myanmar has led foreign investors to regularly reassess their presence in the country, with many of them adapting to mitigate the effects of the new environment. While some believe that departures driven by the coup and subsequent political turmoil have largely run their course, others foresee a steady, albeit smaller stream of departures in the future.
Meanwhile, the number of new investors has declined dramatically. Regime officials have been cited as stating that “new investment is unlikely”, with the unstable political situation a major deterrent. Approved FDI has fallen from just over $5bn in FY 19-20 to just $662 million in FY 23-24. The majority of post-coup approved investment is in the power sector – though many of these have not been implemented. New manufacturing investments have declined precipitously, their average size having fallen from $8.88 million under the NLD to just $3.66 million under the SAC. A significant share of new post-coup investments is incremental – coming from existing investors with capital trapped in the country. Actual FDI was over $1 billion in 2022 and over $400 million in the first half of 2023, although this may be largely asset transfers from international to domestic entities and not cash inflows. However, the regime has sought out new investment, especially from politically allied countries. It has strategically offered economic incentives to China and Russia. China’s interest in resuming major infrastructure projects in Myanmar has the potential to be particularly advantageous for the SAC.
Since the coup, foreign businesses have faced numerous challenges – some domestic and some international. Myanmar’s blacklisting by the Financial Action Task Force (FATF) is one challenge – both practical and reputational. It requires that banks undertake due diligence around customer identification and verification, though many businesses had already faced enhanced due diligence requirements before this blacklisting. Some international banks have stopped undertaking certain transactions with or related to Myanmar, such as clearing private USD transfers. Similarly, Singaporean bank UOB halted certain transfers to and from Myanmar in August 2023. Domestic changes include extensive new policies regarding foreign exchange, as well as enhanced trade licensing. There has also been an erosion in the transparency of governance, for example the SAC’s removal of public access to the Myanmar Companies Online registry (MyCo), and associated official documents about the company’s financial information and shareholders.
Fig. 1: Approved Investments in Key Sectors between 2016 and 2024 (Feb)
Despite the challenges, businesses – including foreign investors – have shown resilience and adaptability. Business adaptations include changes in business models, expansion to new markets, offshoring of some back-office functions, and changes in financial management practices. Notably, some businesses have even started to engage in outbound investment, especially to Thailand, offering goods and services to Myanmar’s ever-growing migrant community. Despite poor macroeconomic performance and significant uncertainty, business sentiment remained relatively resilient – at least until early 2024. By August 2024, however, business sentiment as recorded in the monthly Performance of Manufacturing Index had hit an all-time low.
PROSPECTS FOR MYANMAR’S ECONOMY AND INCLUSIVE GROWTH
Myanmar’s near-term economic prospects are weak, weighed down by conflict, outmigration, uncertainty, and SAC policies that extract from the real economy to resource the regime. The SAC’s level of control, not just over geographical territories but also over public compliance with its policies and regulations, is declining. There is increasing uncertainty not just over which economic policies and regulations apply and to whom, but more fundamentally which actors have the authority and capability to govern activity in which areas.
In SAC-controlled parts of Myanmar, the economy will continue to underperform. Inflation is likely to continue at high levels, and the ceiling for growth is low. It is unlikely that the SAC will be able to restore either economic stability or the stability from conflict necessary for economic growth to resume. “True economic development,” notes former Deputy Minister Winston Set Aung, “requires political stability and public confidence, both of which were lacking in Myanmar after the military coup on 1 February 2021.” In short, Myanmar’s economic ills do not have a technical solution. They are more deeply rooted, and will likely require significant political changes to be addressed.
SAC rule is creating significant and potentially long-lasting economic distortions, while discouraging investment and driving outflows of human, physical, and financial capital at the same time. Distortions stem from regime policies aimed at controlling prices, foreign exchange and trade. For example, by selling forex to some importers at preferential rates, the SAC is effectively subsidizing these imports. This gives these goods an advantage against domestically-produced competitors, and undermines the revenues, profits, and wage-paying capacity of domestic enterprises. It also discourages investment in these sectors. At the same time, trade licensing, price controls and exchange rate interventions are incentivizing informality, often because the formal system is not economical for most businesses. The effects of these distortions are likely to accumulate over time.
The SAC’s economic approach is unlikely to change, because the tools the regime uses to stay in power are the same ones that limit inclusive growth. For example, the SAC’s deficit monetisation is a key driver of inflation and declining real incomes, yet the regime persists in funding budget deficits this way because it is more feasible than collecting taxes. The regime sometimes also reaps economic benefits from its conflict actions – albeit indirectly. For example, retaliatory airstrikes against non-military targets contributes to the flight of people and money from conflict-affected areas to safer locations, which includes major cities controlled by the SAC. In some cases, conflict has also redirected value chains away from borders and towards seaborne trade, which the SAC controls.
Myanmar’s economy is at risk from increasing pressure from external sources, including a potential call for countermeasures from the FATF, which may come soon if Myanmar fails to make meaningful progress on various measures. These countermeasures, if implemented, could make legitimate transactions more difficult, and significantly affect the country’s economy. There are also calls for greater sanctions on Myanmar, including on the Myanmar Economic Bank and the Myanmar Oil and Gas Enterprise. While calls for broader sanctions such as trade embargoes have been limited, the continued proliferation of sanctions will have effects – even if that is only through raising transaction costs for legitimate enterprises and contributing to negative perceptions of Myanmar.
In non-state-controlled areas, economic prospects are also constrained, weighed down by conflict, uncertainty, the generally remote nature of conflict-affected areas, and the lack of economic governance experience. Non-state groups also face another important constraint – their inability to access international economic systems, for example, trade. This limits the scope for economic development and also for these groups to finance their activities through licit means. This is a major advantage for the SAC, as it has co-opted the formal economic system for its own benefit. Non-state groups also face significant pressure from other countries, as is evident in recent Chinese pressure on the MNDAA to cease fighting. The trajectories of non-state groups will vary, though those that formalise economic governance as well as develop trade and financial links with other countries – even informal ones – may see improved economic prospects. However, there is significant uncertainty about how economic governance will take shape in these areas – and that will have major implications for Myanmar’s conflict, politics and economy.
This is an adapted version of ISEAS Perspective 2025/11 published on 13 February 2025. The paper and its references can be accessed at this link.
Jared Bissinger is a Visiting Fellow with the Myanmar Studies Programme at ISEAS – Yusof Ishak Institute, and the Research Lead at Catalyst Economics.
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