Impact of the twin crises on human welfare in Myanmar (November 2021)

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Key Messages

  • Poverty headcount is likely to return to the levels not seen since 2005, effectively erasing the benefits of the pre-COVID-19 unprecedented economic growth;

  • Similarly, poverty depth will revert to levels not seen since 2005. Put simply, a significant amount of money (4.5% of pre-COVID-19 GDP) would be needed to bring the new poor above the poverty line. This additional spending is sizeable, given that pre-COVID-19 spending on social transfers was less than one percent of GDP;

  • In addition to child poverty, urban poverty is likely to increase three-fold, also impacting the overall security of urban areas;

  • The poorest states and regions prior to COVID-19 and the military takeover are likely to still remain poor, with poverty exacerbated in these areas;

  • The poverty gap (measure of depth of poverty) is likely to remain high in the poorest states, though it is likely to increase by a higher margin in states and regions such as Mandalay and Yangon.

  • The highest number of poor people will be living in Ayeyarwady, followed by Yangon and Sagaing.

  • When considering the state/region breakdown, the highest amount of resources needed to bring the poor over the poverty line will be needed in Yangon, influenced partly by conflict-related concentrated violence.

Executive Summary

Myanmar’s recovery from the COVID-19 induced economic crisis received a setback in early 2021. On 1st of February, the military of Myanmar staged a coup d’état, effectively stalling the democratic transition that the country had embarked upon. The effects of the combined crises (COVID-19 and military takeover) are still being felt throughout the country, with the World Bank predicting an annual economic contraction of up to 18 percent. In the same vein and earlier in the year, a UNDP analysis warned that half of the population in the country could be living in poverty by early 2022 under a pessimistic scenario.

Against this background, this policy brief provides an update of the initial findings on the impact of the combined crises on poverty. More specifically, it provides an additional robustness to the findings from the initial report by drawing on primary data collected in May-June, 2021. This updated analysis suggests that poverty headcount rates could increase by 20 percentage points (relative to the 2017 levels – the last time welfare in Myanmar was assessed). In other words, about 46 percent of the population in the country could be living below the national poverty line by early 2022, reconfirming the pessimistic scenario from the earlier report published in April, 2021. The additional analysis conducted for this policy brief also suggests a significant increase in other poverty indicators: extreme poverty and poverty gap. The results reported in this brief confirms the earlier findings that the combined crises will effectively erase the progress made over the last two decades vis-àvis poverty reduction.

Furthermore, disaggregated analysis indicates that the urban poverty headcount could increase threefold, coupled with additional increases in rural poverty. As a direct result of this, the poverty headcount is expected to spike in more urbanised states and regions such as Yangon and Mandalay. Poverty is also expected to increase in the traditionally poorest parts of Myanmar (Chin and Rakhine), rendering poor over two thirds of the people living there.

Finally, in addition to the contemporaneous effect, this policy brief also asserts that there is a much more profound longer-term effect of the rising poverty rates. With over half of the children in the country projected to be living below the national poverty line, there are worrying trends which are likely to worsen the quality of human capital of the next generation. These trends are arising because the rise in poverty is forcing people to adopt negative coping strategies which are impacting upon all stages of human capital building, from increasing nutrition-related deficiencies and stunting physical growth, to increasing high school drop-out rates and worsening education outcomes. Ultimately this could result in suboptimal medium-to-long term economic growth, which, in turn, could see many households stuck in permanent poverty for the years to come.