The bloodshed triggered by the coup in Myanmar has lasted for more than two months, and the local economy has plunged. Not only has the number of poor people increased sharply, but the foreign investment and tourists that have revived the economy over the past 10 years have also been scared away, leading to a double-digit economic contraction this year.
It is worth noting that since the coup, the exchange rate of the Burmese kyat against the U.S. dollar has depreciated by 14%, with a reference rate of 1,330 kyat to the U.S. dollar, but last Friday an exchange announced an exchange rate of 1,600 kyat to the U.S. dollar, indicating a higher-than-expected depreciation. In addition, local cooking oil rose by 31%, and even soy milk also increased by 15%, so prices are on the verge of getting out of control. Outsourced suppliers of materials and printing equipment for the Burmese dollar banknotes have been cut off, and the supply of banknotes may be reduced unless they are supported by Russia or China. If the public’s trust in the Myanmar dollar slips, it could lead to more serious economic disruption, according to Toru Nishihama, chief economist at the Dai-ichi Institute for Life Economics, a Japanese think tank, which says the economy could be dollarized or renminbiized.
In Myanmar, banks have closed, factory workers have fled the city, civil servants are not working and the Internet is paralyzed. Only 14 of the more than 500 branches of KBZ, the largest private bank in the country, are operational. In response, the local central bank has threatened to levy fines on banks that do not reopen.
The country is already one of the poorest countries in Asia, with 6 million people living on less than US$3.2 (about HK$24.9) a day; after the coup, the World Bank estimates that the number of people living on less than US$3.2 a day will increase by 1.8 million this year, a 30% increase. Before the coup, the World Bank expected the local economy to grow by 2% in the 12 months to the end of September next year, but now the economy is expected to shrink significantly by 10%; analysts Fitch Solutions even expect a 20% drop.
The textile industry, which accounts for nearly a quarter of Myanmar’s exports, is losing a lot of business as major brands such as Sweden’s H&M and Italy’s Benetton are suspending new orders. Massive Internet restrictions caused by the unrest have hit the financial and even service sectors, and a restaurant owner in Yangon said he had relied on online orders to cope with the outbreak, but now they have almost stopped and sales have plummeted by 70 percent. The country’s overseas tourist traffic, which has increased fourfold over the past 10 years, has also been hit, with the owner of a travel agency that receives travelers from Europe and the United States revealing that only staff hours were cut during the epidemic, but now they may have to lay off staff.
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