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Pressure eases on Myanmar inflation due to declining consumer demand

Declining consumer spending and demand as a result of COVID-19 has suppressed inflation levels in Myanmar, according to a June report by the Central Statistical Organisation.

Inflationary pressure first showed signs of easing in March, after the first cases of the coronavirus were reported in Myanmar. Inflation has continued to decline over the past three months, settling at 7.9 percent in June.

The trend of falling inflation is similar to the rest of the world. “Consumers all over the world and in Myanmar are spending less due to COVID-19 restrictions.Domestic consumer demand is falling and this is resulting in softer inflation,” said Dr Zaw Oo, a local economist.

Inflation in Myanmar had in fact been on a steady rise before the pandemic. Prices spiked in July last year, when the government first stopped subsidising electricity tariffs. With the price of electricity and other essentials like food and oil on the rise, inflation reached a high of 9.2pc in February, up from 8pc in July 2019.

Local businesses have suffered as a result of poor consumer demand. Due to COVID-19, the majority of Myanmar firms have experienced lower sales and cash flow shortages, resulting in reduced access to credit needed to support operations, according to the results of a World Bank survey released August 14.

The survey also revealed that 16 percent of firms had temporarily closed their operations for an average of eight weeks as a result of COVID-19.

As a result, Myanmar’s inflation is forecast to fall further this year and remain at around 6pc until next year, according to the Asian Development Bank. Meanwhile, GDP growth is forecast to drop from 6.8pc in fiscal 2018-19 to just 1.8pc in the current fiscal year.

The World Bank’s forecasts are more dire, with GDP expected to slump to just 0.5pc this year.

However, if the domestic spread of the coronavirus is brought under control and the global economy recovers swiftly, GDP could recover as soon as next year, reaching 6pc according to ADB and 7.2pc according to the World Bank.

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Source : Myanmar Times

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