The garment sector faces a weak outlook due to factory closures.
Myanmar's 2020 GDP growth forecast is 3.6% or 2.7 percentage points (ppt) lower than the previous estimate of 6.3%, as the impact caused by the spread of COVID-19 resulted in concurrent global supply and demand shock, according to Fitch Solutions report.
Private consumption growth will be under pressure due to reduced income and loss of employment, the report noted. Tourist arrivals are also expected to fall by 50%, whilst $800,000 worth of travel bookings were cancelled since late January due to the outbreak and travel restrictions.
The garment sector, accounting for 25% of total exports, will also experience stress due to shortage of cloth imports from China, factory closures, weaker global demand, and suspension of flights. The ongoing oil price war in Saudi Arabia and Russia will also continue to put pressure on fuel and petroleum gas prices, which account for almost 30% of Myanmar’s exports.
The government announced a monetary and fiscal stimulus in March to mitigate the impact of COVID-19 and prevent businesses from closing in the coming months. This includes a $70m fiscal package for loans, tax payment and exemptions to support domestic businesses.
Tax filing deadlines will also be pushed to September and businesses will be exempted from paying the 2% advance income tax on exports until the end of FY2019-2020.
However, Fitch expects that the impact of the stimulus will be small as it mainly supports larger domestic businesses, accounting for only about 10% of total registered businesses in the country.
The report notes that small to medium enterprises (SMEs), which make up the remaining 90% of registered businesses, have generally struggled to borrow from banks due to an inability to adequately price loans, accounting only 16% of total loans between Q3 2018 and Q2 2019.
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