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Myanmar Coup

Myanmar factory activity renews record low 2 months after coup

March PMI shows inflation and supply chain disruptions weighing on businesses

Political turmoil in Myanmar has slammed the brakes on production, darkening the economic outlook.   © Reuters

SINGAPORE -- The turmoil in Myanmar continues to slam businesses, the latest activity gauge shows, with manufacturers suffering from inflation as well as supply chain disruptions.

The country's manufacturing Purchasing Managers' Index (PMI) for March, released on Thursday by IHS Markit, hit 27.5 -- down from February's 27.7. The new figure renews a record low since the survey began five years ago.

The PMI poll asks companies about changes in output, new orders and other business conditions, compared with the previous month. Any number below 50 indicates a contraction, while a reading above 50 means the opposite. In January, before the coup, the figure was 47.8.

The latest survey was conducted from March 12 to 23. During the month, the military's crackdown against citizens escalated, pushing the death toll since the Feb. 1 takeover above 500. A number of factories, some Chinese-owned, were affected by fires believed to be arson attacks.

"March data indicates another severe deterioration in business conditions across Myanmar's manufacturing sector," IHS economist Shreeya Patel said. "Countrywide protests, factory closures and political uncertainty bring a drastic setback for the industry's growth prospects."

According to the survey, transportation delays stemming from the prolonged crisis contributed to supply chain problems. About 70% of the survey respondents said new order volumes declined in March from February.

Moreover, raw material shortages and a weakening local currency against the dollar added to strong inflationary pressures in March. The local currency, the kyat, has depreciated by more than 5% against the dollar since the coup.

Manufacturers' input prices rose for the sixth consecutive month in March, the survey found.

Meanwhile, international organizations have lowered economic forecasts for the country this year. Last week, the World Bank said in its East Asia and Pacific Economic Update report that Myanmar's economy is expected to shrink 10% for the current fiscal year ending September 2021, from 1.7% growth the previous year.

Separately, on Wednesday, the ASEAN+3 Macroeconomic Research Office, or AMRO, projected a 2.6% contraction this fiscal year in its regional economic outlook report.

"The declaration of a one-year state of emergency by the military in early February has caused significant uncertainty and could weigh on the economy going forward," the AMRO report said. "Growth momentum will remain soft in the short term, while the outlook depends on the progress of vaccinations and the development of the political situation."

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