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Current Economic Conditions in Myanmar and Options for Sustainable Growth

May 1, 2003

David Dapice

Abstract: In this paper, an extensive report on the economy of Myanmar prepared in 1998 is supplemented by more recent reports as of fall 2002 (included as appendices). The economy of Myanmar is one of the poorest in South East Asia. Despite relatively rapidly growth during the 1990’s, per capita income by 1998 was little higher than in the middle 1980s. Inflation rates are high, the currency value has fallen sharply, and Myanmar has one of the world’s lowest rates relative to income of government revenue and non-military spending. Agriculture in Myanmar has an unusually high share (59%) of GDP. Despite a high reported growth rate, yields for most food crops have remained stagnant or dropped. Poor price incentives and credit systems constrain agricultural production. As of 1998, farm wages are barely enough to provide food, with nothing left over for clothing, school fees, supplies, or medicine. Environmental problems including deteriorating water supply and diminishing common property resources further impact the poor. Industry suffers from limited credit, fluctuating power supplies, inflation and exchange rate instability. A possible bright spot is offshore gas potential. However, much of the expected revenue from offshore gas development may already have been pledged as collateral for expenditure prior to 1998, and thus will go primarily to service debt. Recent evidence summarized in a paper by Debbie Aung Din Taylor (Appendix 3) indicates that most people in rural areas are much worse off today than a decade ago. Decline in agricultural production is aggravated by severe degradation of the natural resource base. River catchment areas are denuded of forest cover, leading to more frequent and severe flooding. Fish stocks and water supplies are diminishing. These trends are pervasive and reaching a critical level. Assistance is urgently needed to provide the rural poor. Sustained international attention is needed to reverse the current rapid decline of economy and environment.

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