Min Han Thar Mon (Political Economy Analyst)
War, Inflation, and Myanmar’s Economic Anxiety
Myanmar’s economy is facing severe challenges, including armed conflict, rising commodity prices, inflation, and prolonged economic stagnation. These pressures are affecting key sectors and have led to an increase in the poverty rate. As a result, prospects and hopes for Myanmar’s economic recovery in the near future remain bleak, according to the World Bank’s report “Myanmar Economic Monitor: Threatened Livelihoods.”
Some Key Features of Myanmar’s Economic Landscape
More than five years after the 2021 military coup, Myanmar’s economic landscape continues to face major challenges, including ongoing conflict, macroeconomic instability, and persistent inflation. Against this backdrop of mounting economic difficulties, it is increasingly questionable whether the military-led elections planned for 2025–2026 can offer any meaningful solutions. The conflict in Myanmar has disrupted cross-border trade with China and Thailand, severely interrupting domestic goods distribution supply chains—one of the most critical constraints on the economy. In February 2024, the enforcement of the mandatory conscription law further worsened labor shortages across various industries. Since the coup, the number of internally displaced persons (IDPs) has risen to a total of 3.1 million. The depreciation of the kyat, restrictions on foreign currency use, and limited import licensing have combined to fuel prolonged inflation and severe shortages of essential imports. Power outages have also intensified, forcing businesses to rely on costly diesel generators, which have significantly increased production costs.
Is Myanmar’s Economic Activity Stalling?
Myanmar’s Gross Domestic Product (GDP) grew by only 1 percent in the fiscal year ending March 2025, remaining about 10 percent below pre-COVID-19 levels. In April 2025, businesses were operating at an average of only about 65 percent of capacity. Although this marked an improvement compared to September 2023, performance remains below earlier years. The services sector—particularly retail, wholesale distribution, and tourism—continues to suffer due to high inflation and declining consumer purchasing power. While the manufacturing sector showed some improvement in April and May 2025 according to the Purchasing Managers’ Index (PMI), it is still grappling with six consecutive months of contraction. The agricultural sector appears relatively resilient due to increased inputs and improved crop yields. However, ongoing constraints on access to credit and the impacts of armed conflict continue to pose serious obstacles to agricultural production.
Weaknesses in Myanmar’s Labor Market
Myanmar’s labor market remains fragile, with only a partial recovery observed by the end of 2024. Although the employment rate increased by 2.3 percent between the end of 2022 and the end of 2023, it is still 7.4 percent lower than its 2017 level. Over the same period, the adult unemployment rate rose from 6.7 percent to 8.1 percent. Job vacancies also remain below 2020 levels. At the same time, internal labor migration has been disrupted, as concerns over armed conflict and forced conscription have led to severe labor shortages in certain regions and industries.
Pressures on Myanmar’s Trade and Exchange Rate
During 2024–2025, Myanmar’s trade sector declined significantly compared to the same period in the previous year, with exports falling by 13 percent and imports by 20 percent. Overland border exports dropped by around 44 percent, while overland border imports accounted for as much as 71 percent of the total decline in imports. Trade with China and Thailand was constrained as key border crossings came under the control of resistance forces following the impacts of Operation 1027. Although some trade continued through alternative land routes and maritime channels, the kyat depreciated sharply. During 2024–2025, the gap between the official fixed exchange rate and the parallel market rate widened threefold. In addition, regulations requiring foreign currency sales to banks and restrictions on import licenses further reduced access to foreign exchange, intensifying downward pressure on the kyat.
Impacts of Inflation and Rising Poverty in Myanmar
Myanmar’s inflation remains elevated, driven largely by rising food and fuel prices. According to the Consumer Price Index (CPI), inflation increased by 30.4 percent year-on-year in September 2023. Fuel and transportation costs rose further due to high global oil prices and the sharp depreciation of the kyat. Food price inflation has been pushed up by higher export prices, trade and transport restrictions, and disruptions to domestic production. The fiscal deficit is expected to widen further. It reached 5.7 percent of GDP in the 2023–2024 fiscal year and is projected by some economists to increase to 6.1 percent of GDP in the 2024–2025 fiscal year. The combined effects of economic stagnation, rising prices, and a weakened labor market have contributed to a significant increase in poverty levels. Myanmar’s poverty rate is estimated at 32.1 percent in the 2023–2024 fiscal year, reversing progress made since 2015. Over the past six years, the urban poverty rate has risen more rapidly than the rural poverty rate.
Bleak Prospects for Myanmar’s Economic Growth and Political Stability
Myanmar’s economic outlook remains weak. GDP is expected to grow by only 1 percent in the 2024–2025 fiscal year, leaving the economy about 9 percent below its 2018–2019 level. Economists note that prolonged inflation, along with constraints on labor, foreign exchange, and electricity supply, continues to have a severe impact on economic activity. Agricultural activity is expected to expand due to higher export volumes and rising farm-gate prices paid to farmers. However, consumer price inflation is projected to remain high, though it is expected to decline from 26.5 percent in the 2023–2024 fiscal year to 18 percent in 2024–2025. Prospects for poverty reduction and improvements in household living standards remain bleak. Households are expected to continue facing ongoing economic pressures and limited opportunities for meaningful economic improvement.
Summary and Key Takeaways
According to World Bank reports and assessments by economists, Myanmar’s economy is expected to continue struggling under multiple pressures following the military coup, including armed conflict, inflation, and economic stagnation. Amid these overlapping challenges, prospects for economic recovery remain highly uncertain, and hopes for a sustained rebound are still limited. Given the scale and complexity of the difficulties facing Myanmar’s economic environment, the World Bank emphasizes in its report the urgent need for comprehensive macroeconomic and social policies to address multi-sector challenges. In this context, it remains an open question whether the outcomes of the military-led elections planned for 2025–2026 can resolve the current economic crises, contribute to political stability, or help bring an end to the ongoing conflict. These questions are left to readers to critically assess and reflect upon.
