BANGKOK — The military coup in Myanmar is unlikely to do the country’s struggling economy, once considered a promising “last frontier,” any good at all.
Myanmar’s economy has languished as the pandemic added to its challenges and the prospect of fresh Western sanctions in the wake of this week’s army takeover will only make things tougher for those on the ground, economists say.
It’s unclear if China might help make up for lost business due to the increased political risks and potential for turmoil if public anger over the ouster of massively popular Aung San Suu Kyi and fellow civilian leaders erupts in mass protests.
Apart from raising the risk of political unrest, economic sanctions and other disruptions, the coup likely will prove to be a huge setback to efforts to improve Myanmar’s investment environment, curb crony capitalism and build a more sustainable path to growth.
“With this kind of situation the sad thing is that you don’t even need to put sanctions in place because the dire economic consequences of the conflict, combined with what happening now makes the country look very unstable and not the right place to invest right now. So the repercussions are immediate,” said Laetitia van den Assum, a former diplomat and a member of the Advisory Commission on Rakhine State, which was set up by former U.N. Secretary General Kofi Annam to improve Myanmar’s treatment of minority Rohingya Muslims.
The military seized power shortly before a new session of Parliament was to convene on Monday, declaring its actions were legal and constitutional because Suu Kyi’s government had refused to address voting irregularities in November’s election, which her National League for Democracy won in a landslide.
That provoked a rush to ATMs and food stalls. TV signals were cut and passenger flights were grounded. Authorities urged calm, while moving to suppress dissent through Facebook and other social media.
Commander-in-Chief Senior Gen. Min Aung Hliang, who now controls the government, met with business leaders and pledged to maintain financial stability and “continue work on international projects.”
Meanwhile, the central bank promised it would not demonetize any of the currency, a reasonable fear: three past demonetizations provoked much anguish and anger.
“The general public can continue using the banknotes and banking services without any worries, and all the banks have been instructed to provide regular banking services,” the Central Bank of Myanmar said in a notice.
The economy already was faltering before the pandemic. Sian Fenner of Oxford Economics estimates the coup will likely cut growth this year by half, from an earlier forecast of 4.1% to 2%.
The past decade’s average annual growth rate of 7.6% had slowed to just 2.9% in 2019. Last year, the World Bank estimates the economy grew 0.5%.
The economy’s performance fell short of popular expectations as growth benefited a tiny part of the population and reforms took a back seat to efforts to end decades of ethnic civil conflict. Tourism has suffered and new sanctions were imposed following a 2017 counterinsurgency campaign that drove about 740,000 of the mostly Muslim Rohingya to flee the country.
Min Aung Hliang is one of four generals who were blacklisted by the U.S. Treasury Department for the military’s abuses in Rakhine and other ethnic majority regions.
Given the recurring risks of falling afoul of such sanctions, many U.S. companies have held back on major direct commitments, instead opting for local partnerships. Fast food giant Yum! Brands Inc., for example, opened its first Kentucky Fried Chicken outlet, a franchise with local partner Yoma Strategic Holdings, in downtown Yangon last year.
President Joe Biden said Monday the coup would bring an immediate review of U.S. sanction laws, “followed by appropriate action.”
“We will work with our partners to support restoration of democracy and the rule of law, and impose consequences on those responsible,” he said in a speech to State Department employees on Thursday.
The potential impact of sanctions would depend on how far-reaching they are. Many Western brand names, including Samsonite, LL Bean, H&M and Bass Pro, have suppliers in Myanmar, based on shipping data from Panjiva.
Exports of clothing, shoes and other consumer goods are a vital source of growth. They doubled after the European Union in 2015 began allowing preferential imports from Myanmar under an “everything but arms” arrangement in recognition of the country’s progress toward democracy.
The garment and textiles sector employs 450,000, mostly women, in more than 600 factories, according to the Myanmar Garment Manufacturers Association.
“The development of a competitive low-end manufacturing sector has traditionally been the route out of poverty for low-income countries in Asia, so throttling textiles would have lasting repercussions,” Gareth Leather of Capital Economics said in a report.
Japan’s Kirin Holding Co. announced Friday it was ending its joint venture with the military-linked conglomerate Myanma Economic Holdings PLC, whose board is entirely composed of military leaders.
“Given the current circumstances, we have no option but to terminate our current joint-venture partnership,” Kirin said. “We will be taking steps as a matter of urgency to put this termination into effect.”
The military, which had ruled Myanmar for five decades, does not have a strong track record on handling the economy. Beginning in the 1990s, foreign investment rose as the leadership began sporadic efforts to modernize and reopen the economy.
Business and tourism revived as a result of a transition to a civilian, quasi-democratic government a decade ago. Poverty dropped from about half of the population to just over a quarter, according to the World Bank. But rural areas, home to about 70% of the population, still lag far behind.
The coup threatens the short-term outlook for investment and foreign business, but also the longer-term potential for growth, says Fenner of Oxford Economics.
It is likely to delay or perhaps derail the government’s efforts to improve the business environment, build up a modern banking system and other financial industries, cut corporate taxes and move ahead with “strategic infrastructure projects,” he noted.
Myanmar has made progress in some areas in recent years, including compliance with anti-money laundering standards, opening a stock exchange and enacting a financial institutions law. The government was preparing to implement a medium- to long-term economic resilience and reform plan after the election.
But the military has retained ultimate control both of the government and much of the economy, enabling cronies to dominate lucrative trading in gems and other natural resources. Private businesses are starved of cash while investment in schools, health and other vital foundations of future growth has suffered.
“You need the kind of investment that helps you build and adapt to climate change, that helps you to make your economy more sustainable in the long run. You need innovation. And that’s not going to come from crony capitalism,” van den Assum said.
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Milko reported from Jakarta, Indonesia.
Elaine Kurtenbach And Victoria Milko, The Associated Press
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
