Myanmar’s Economy After the 2021 Coup: A Detailed Analysis

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Myanmar’s economy has been in turmoil since the military coup on February 1, 2021. The coup led to political instability, economic contraction, loss of investor confidence, international sanctions, and rising poverty. The country, which was once on a path toward economic liberalization and growth, has faced a dramatic decline in GDP, currency depreciation, inflation, and severe disruptions in key industries.

This detailed analysis explores the post-coup Myanmar’s Economy landscape, focusing on the major challenges, sector-wise impact, and future outlook.

Economic Contraction

Before the coup, Myanmar’s economy had been one of the fastest-growing economies in Southeast Asia, with an average GDP growth of around 6-7% per year from 2011 to 2019. However, the military takeover devastated economic activity, leading to a sharp contraction.

The World Bank estimated that Myanmar’s GDP shrank by 18% in 2021, wiping out nearly a decade of economic progress.
Growth has remained sluggish, with modest recovery attempts overshadowed by sanctions, internal conflicts, and capital flight.
Business closures, foreign investment withdrawals, and a decline in consumer confidence have further stalled economic progress.

Currency Devaluation and Inflation

One of the most visible signs of Myanmar’s economic collapse has been the severe devaluation of the Myanmar Kyat (MMK).

Before the coup, the Kyat traded at around 1,300 MMK per USD. By 2022, it had depreciated beyond 3,000 MMK per USD due to capital flight, panic-driven dollar demand, and central bank mismanagement.
Inflation soared, with prices of essential goods rising by 30-40% in 2022-2023. This has severely affected purchasing power, especially for low-income households.
The Central Bank of Myanmar (CBM) introduced foreign currency controls, forcing businesses to convert foreign currency earnings at unfavorable official rates, which led to further distortions and a thriving black market for dollars.

Foreign Investment and Business Exodus

The business environment in Myanmar has deteriorated due to political instability and sanctions, causing a mass exodus of foreign companies.

Foreign Direct Investment (FDI) Decline

Myanmar received $5.5 billion in FDI in 2020, but post-coup investments have dwindled drastically.
In 2021, FDI inflows dropped to around $1.7 billion, and many foreign investors froze or withdrew their projects.
Major Western and regional investors, including Telenor (Norway), TotalEnergies (France), and Chevron (USA), exited Myanmar, citing human rights concerns and risks.

China and Russia’s Economic Influence

China and Russia have continued economic engagement, particularly in infrastructure, energy, and arms deals.
China remains Myanmar’s largest trading partner, but even Chinese companies face challenges due to instability and anti-China sentiment among the local population.
Russia has increased military and energy sector cooperation, providing fuel supplies and economic aid to the junta.

The Impact of International Sanctions

Following the coup, the US, EU, UK, and Canada imposed targeted economic sanctions aimed at cutting off the military’s financial resources.

Sanctions on Key Economic Sectors

Myanmar Oil and Gas Enterprise (MOGE): One of the largest revenue sources for the junta was sanctioned, restricting the flow of foreign currency.
Military-linked businesses: Companies under the military conglomerates Myanmar Economic Corporation (MEC) and Myanmar Economic Holdings Limited (MEHL) were black listed.
Banking restrictions: International financial institutions cut ties with Myanmar banks, isolating the country from the global financial system.

Effect of Sanctions on the Economy

The military’s access to foreign currency reserves has diminished, making it harder to sustain economic stability.
Businesses reliant on international trade and banking services faced disruptions, leading to higher costs and reduced investment.
Illicit trade and black-market activities have expanded, as businesses attempt to bypass restrictions.

Sector-Wise Economic Impact

A. Agriculture and Livelihoods

Agriculture, which accounts for about 30% of GDP and employs over 60% of the workforce, has been significantly affected.

Rising fuel and fertilizer prices have increased production costs for farmers.
Disruptions in supply chains and exports have lowered farmer incomes.
The junta’s control over rural areas has weakened, leading to conflicts that disrupt farming communities.

B. Manufacturing and Industry

Myanmar’s manufacturing sector, particularly garment production, saw mass factory closures as foreign brands pulled out.
Unemployment soared, affecting hundreds of thousands of factory workers, especially in Yangon’s industrial zones.
Supply chain bottlenecks and power shortages have made it difficult for industries to operate efficiently.

C. Banking and Finance

The banking sector has been in crisis, with withdrawal limits, liquidity shortages, and reduced trust in financial institutions.
Informal remittance networks (hundi) have become more dominant, bypassing official banking channels.
Foreign currency reserves have declined, making it harder for businesses to import goods and services.

D. Tourism and Services

The tourism sector, once a key revenue source, has collapsed due to security concerns and international travel bans.
Many hotels, airlines, and travel agencies have either shut down or downsized significantly.
Domestic tourism remains limited due to ongoing conflict and economic hardship.

The Rise of Illicit and Parallel Economies

With formal economic activity in decline, illicit industries have expanded:

Illegal trade in jade, timber, and wildlife has surged.
Drug production (methamphetamine and opium) has increased, with armed groups financing operations through the narcotics trade.
Cross-border smuggling (mainly to China and Thailand) has grown, replacing formal trade channels.

Humanitarian and Social Impacts

Rising poverty: The UN estimates that nearly 50% of Myanmar’s population lives in poverty, up from 25% before the coup.
Food insecurity: Due to inflation and supply chain disruptions, millions face hunger and malnutrition.
Job losses: The combined effects of factory closures, declining businesses, and economic stagnation have led to mass unemployment.
Healthcare crisis: International funding for healthcare has decreased, and many doctors have joined the civil disobedience movement, creating a severe healthcare shortage.

Future Economic Outlook

Short-Term (2024-2025)

Continued economic instability due to sanctions, internal conflicts, and currency fluctuations.
Potential further capital flight as foreign investors avoid Myanmar.

Medium-Term (2025-2030)

China and Russia may increase their economic footprint, but their investments will be limited to strategic sectors (energy, infrastructure, and arms).
Domestic resistance movements and international pressure may force economic restructuring.

Long-Term

Myanmar’s long-term economic prospects depend on political stability, democratic transition, and economic reforms.
If Myanmar remains under military rule, sanctions and economic isolation will persist, limiting growth opportunities.
A return to democracy could restore international aid, investment, and economic recovery.

Conclusion

Since the 2021 coup, Myanmar’s economy has suffered one of the worst collapses in its history. The Kyat’s devaluation, inflation, foreign business withdrawals, and economic sanctions have left the country in deep crisis. Without political stability and international engagement, Myanmar’s economic recovery remains highly uncertain.

Photo Credit @ Euractiv