Significant economic impacts due to COVID-19 and falling remittances in Myanmar

By: Xinshen Diao and Michael Wang

As COVID-19 spreads in more low- and middle-income countries, we see a range of responses and effects. In this blog post, Xinshen Diao and Michael Wang assess the direct and indirect impacts on Myanmar’s economy after a two-week lockdown. Almost all households have reduced income from disrupted domestic economic activity or lost remittances. The authors explore immediate policy actions to support poor and vulnerable groups and look at longer-term implications for fiscal stimulus and economic changes post-COVID.—John McDermott, series co-editor and Director, CGIAR Research Program on Agriculture for Nutrition and Health (A4NH).  

The COVID-19 pandemic and government lockdown in Myanmar have led to falling exports and lost revenue from tourism and international remittances, hitting the economy hard. In a new series of policy notes, we examine the economic impacts of the pandemic and restrictive measures to mitigate the health crisis, and offer policy recommendations to address declining incomes and other impacts.

Our analysis shows a major short-term economic contraction as a result of the two-week lockdown in April—a 41% decline in GDP along with similar declines in most nonagricultural sectors in comparison to the same period without a pandemic. This is not surprising, as Myanmar’s economy is deeply integrated into a complex supply network both domestically and internationally, and policies affecting certain industries have ripple effects on other sectors through supply and demand linkages. In addition, approximately 4 million Myanmar migrants work internationally, and their lost income due to lockdowns in neighboring countries is expected to impose ongoing significant burdens on low-income households that receive remittances.

In our analysis, we applied a social accounting matrix (SAM) multiplier model to evaluate COVID-19’s direct and indirect effects on Myanmar’s economy. The SAM multiplier model is a simulation tool that describes the economic connections between national economic actors and provides a highly disaggregated picture of the economy, that is suitable for measuring the impacts of short-term shocks.

The lockdown and subsequent restrictive measures have had direct and indirect negative impacts on the flow of goods and services, resulting in a decline of 41 percent in national GDP during the two-week lockdown period (Figure 1). The figure breaks down the decline further to show the different impacts of COVID-19 restrictions on Myanmar’s various economic sectors.