世界銀行-《緬甸經(jīng)濟監(jiān)測》2023年12月：沖突中的挑戰(zhàn)（英）

June2023

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PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorized

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MYANMARECONOMICMONITOR:

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PrefaceandAcknowledgements

TheMyanmarEconomicMonitor(MEM)ispublishedsemiannuallyandproducedbytheWorldBank’sMyanmaroffice.ThiseditionwaspreparedbyateamcomprisingKimAlanEdwards(ProgramLeaderandSeniorEconomist,TaskTeamLeader),KemohMansaray(SeniorEconomist,TaskTeamLeader),ThiDaMyint(CountryEconomist),FayaHayati(SeniorEconomist),andAkaKyawMinMaw(Consultant).TheMEMwasdevelopedundertheguidanceofSebastianEckardt(PracticeManager,Macroeconomics,Trade,andInvestment)andMariamJ.Sherman(CountryDirector).

TheteamisgratefulfortheclosecollaborationandinputsprovidedbyIldrimValley(PublicSectorSpecialist),PikePikeAye(PublicSectorManagementSpecialist),SutirthaSinhaRoy(Economist),SmitaWagh(SeniorFinancialSectorSpecialist),NangHtayHtay(FinancialSectorSpecialist),ValensMwumvaneza(SeniorAgricultureEconomist),YashodhanGhorpade(SeniorEconomist),SoonhwaYi(SeniorEconomist),TaraBeteille(SeniorEconomistandProgramLeader),MateoAmbrosioAlbala(Consultant),NayNweLinnMaung(Consultant),MyoeMyint(SeniorEnergySpecialist),JoonkyungSeong(SeniorEnergySpecialist),MyintKyaw(OperationsOfficer),SadigAliyev(ProgramLeader),WinHteinLin(Consultant),PatrickBarron(Adviser),KhinThidaMaw(CountryOfficer,IFC)andDaisukeFukuzawa(Economist).

DuringthepreparationoftheMEM,theteamdiscussedrecenteconomicdevelopmentswithseveralbusinessassociationsandprivatefirmsandgreatlyappreciatestheirtimeandinsights.TheteambenefittedfromdatasharedbytheRetailers’Association.

TheteamwouldliketothankAidenBenedictGlendinning,KyawSoeLynn,MarkFelsenthal,andtheECRteamfortheirsupportandguidanceonpublicationandoutreach;AyeMeMeTun,MayOoMon,andMayZunThiriAungforexcellentadministrativesupport;SaiNayLinfordataassistanceandforexcellentassistanceinformattingandfinalizingthereport.

TheviewsexpressedintheMEMarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheWorldBankGroup,itsExecutiveDirectors,orthecountriestheyrepresent.TheWorldBankdoesnotguaranteetheaccuracyofthedataincludedinthiswork.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.

CoverandchapterphotographsarethecopyrightoftheWorldBank.Allrightsreserved.CoverimageprovidedbyZawWinnNaing.

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ForinformationabouttheWorldBankanditsactivitiesinMyanmar,pleasevisit

/en/country/myanmar

TobeincludedonanemaildistributionlistfortheMEMseriesandrelated

publications,pleasevisit

/en/country/myanmar/brief/monitoring

oremail

myanmarmonitoring@.Forquestionsandcommentsrelatingtothispublication,pleasecontactmmon@.

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TableofContents

PrefaceandAcknowledgements ii

Abbreviations viii

ExecutiveSummary 1

I.RecentEconomicDevelopments 7

A.Economicconditionshavebecomemorevolatileoverthepastsixmonths 7

B.Economicindicatorshaveweakened,reflectingheightenedvolatilityanduncertainty 8

C.Consumerpriceinflationremainshigh 16

D.Therehasbeensubstantialvolatilityinthekyatexchangerate 19

E.Thefinancialsectorisexposedtoseveralrisks 22

F.Myanmar’stradedeficitwidened,increasingbalanceofpaymentspressures 25

G.Fiscalspaceremainsconstrained,withrevenueswellbelowpre-pandemiclevels 32

H.Economicshocksandconflictcontinuetonegativelyimpactlivelihoods 36

II.OutlookandRisks 38

III.Myanmar’sgarmentindustry:Potentialcurtailed 43

A.Introduction 43

B.Myanmar’sgarmentindustryhassignificantscopeforfurtherdevelopment 44

C.Recentdevelopmentshavecurtailedtheindustry’spotential 47

D.Summaryandconclusion 51

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LISTOFFIGURES

FigureES1:ConflictintensityacrossMyanmar 5

FigureES2:Exchangerates 5

FigureES3:CPIinflation 5

FigureES4:Firms'averageoperatingcapacity 5

FigureES5:ManufacturingPurchasingManagers’Index 6

FigureES6:Merchandiseexports 6

FigureES7:RealGDPestimatesandprojections 6

FigureES8:Myanmargarmentexporttrends 6

Figure1:ConflictintensityacrossMyanmar 7

Figure2:Powergenerationandimports 8

Figure3:Electricityoutagesperday(hours) 8

Figure4:Firms'operatingcapacity,sales,andprofits 9

Figure5:Challengestofirms'operations(shareoffirmsreporting)inSeptember2023 9

Figure6:Numberofonlinejobpostings 10

Figure7:GrossValueAddedatpurchaserpricesbysector(%oftotal),2019-2022 11

Figure8:ManufacturingPurchasingManagers’Index 12

Figure9:RegionalManufacturingPurchasingManagers’Indices 12

Figure10:Constructionpermits(number)andproductionofconstructionmaterials(ton) 13

Figure11:TotalnumberofconstructionpermitsissuedinYangon 13

Figure12:ResidentialsalespriceindexinYangon 13

Figure13:Naturalgasexportvolume 14

Figure14:InternationalarrivalsinMyanmar 15

Figure15:AveragedailyYBSpassengersbymonth 16

Figure16:Myanmarpassenger-miles/freightton-milesviarailway 16

Figure17:CPIinflation 17

Figure18:ContributiontoCPIinflation(annualaverage) 17

Figure19:CPIinflation(YoY)vschangesinUSD/kyatexchangerate(YoY) 18

Figure20:Fuelpriceandkeydrivers,January2021=100 18

Figure21:Recentfoodpricechanges(MoM) 18

Figure22:Regionalchangesinriceprices(lowquality)betweenAprilandOctober2023 19

Figure23:Referencepricevsthemarketpriceofedibleoil(kyatperviss) 19

Figure24:Recentexchangeratedevelopments(kyatperUSD) 20

Figure25:Foreignexchangetransactions(billionkyats) 20

Figure26:Non-performingloans(percent) 23

Figure27:Deposits,creditandassetstoGDP 23

Figure28:Loansoutstandingandsavings-MFIs 25

Figure29:Numberofclients-MFIs 25

Figure30:Tradetrends 25

Figure31:GoodsexportsofEAPcountries 26

Figure32:Exportsbysector 26

Figure33:MyanmargasexportstoChinaandThailand 27

Figure34:Garmentexportstothemajormarkets 27

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Figure35:Agriculturalexporttrends 28

Figure36:Importtrends 28

Figure37:Dieselandgasolineimports 28

Figure38:Otherintermediateproductimports 29

Figure39:Consumerproductimports 29

Figure40:LandimportsfromThailandandChinabymajorlandborderpost 30

Figure41:ExportstoThailandandChinabymajorlandborderpost 30

Figure42:Myanmarlandexportsbyproduct 30

Figure43:Myanmar’slandimportsbyproduct 30

Figure44:FDIcommitments 31

Figure45:Fiscalaggregates(%ofGDP) 32

Figure46:Taxrevenuecomposition 33

Figure47:Nontaxrevenuecomposition 33

Figure48:Compositionofexpenditurebyeconomicuses(%ofGDP) 33

Figure49:Compositionofexpenditurebygovernmentfunction(%oftotalspending) 34

Figure50:Budgetoutturn,spendingandrevenueas%ofthebudgetestimate 35

Figure51:Budgetfinancingneeds(%GDP) 35

Figure52:QuarterlysecuritiesauctionofT-BondsinMMK,Billions 35

Figure53:Changesinretailfoodprices(2017–2023) 37

Figure54:RealGDPgrowthandcontributionstorealgrowthbysector(percent,percentagepoints) 39

Figure55:RealGDPestimatesandprojections 39

Figure56:Inflationforecast 39

Figure57:Currentaccount(percentofGDP) 40

Figure58:RealGDP,oldversusnewfiscalyear 42

Figure59:Myanmargarmentexporttrends 43

Figure60:Garmentworkers(%ofthelaborforce) 45

Figure61:Estimatedvalueaddedperworkerin2022(US$) 45

Figure62:Garmentexportsperworkerin2022(US$) 45

Figure63:Averagemonthlywagesofgarmentworkers(US$) 46

Figure64:Dailyunitlaborcostofvalueadded(US$)in2022 47

Figure65:Dailywage(US$)in2022 47

Figure66:Garmentexportpercapitatrend 48

Figure67:Globalmarketshare,2012-2022 48

Figure68:Poweroutagesandestimatedsaleslost 49

Figure69:Relianceonoff-gridgenerators 49

Figure70:Exportleadtimesoffinishedgoodsin2022 49

Figure71:Theshareoffirmsexperiencingchallengeswithhiringproductionworkers 51

LISTOFTABLES

TableES1Economicdataandprojections 3

Table1SelectedMacroeconomicIndicators(annualpercentchangeunlessindicatedotherwise) 38

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LISTOFBOXES

Box1:Emergenceofmultipleexchangerates 21

Box2:Recentrestrictionsoncross-borderpayments 23

Box3:Borderdisruptionsandtheirpotentialimpactsontrade 29

Box4:AligningmacroeconomicindicatorswithMyanmar’sApril–Marchfiscalyear 41

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Abbreviations

ACLED

ArmedConflictLocationandEventDataProject

AML/CFT

Anti-moneylaunderingandcounteringthefinancingofterrorism

ASEAN

AssociationofSoutheastNations

ATM

AutomatedTellerMachine

bbl

BarrelofCrudeOil

CBM

CentralBankofMyanmar

CBRs

Correspondentbankingrelationships

CMP

Cut-Make-Pack

COICOP

ClassificationofIndividualConsumptionAccordingtoPurpose

CPI

ConsumerPriceIndex

CSO

CentralStatisticalOrganization

DBS

DevelopmentBankofSingaporeLimited

EAO

EthnicArmedOrganization

EAP

EastAsiaandPacific

EU

EuropeanUnion

FAO

FoodandAgricultureOrganization

FATF

FinancialActionTaskForce

FDI

ForeignDirectInvestment

FRD

FinancialRegulatoryDepartment

FY

FiscalYear

GDP

GrossDomesticProduct

GSP

GeneralizedSystemofPreferences

IFPRI

InternationalFoodPolicyResearchInstitute

IOM

InternationalOrganizationforMigration

LPG

LiquefiedPetroleumGas

MEM

MyanmarEconomicMonitor

MFTB

MyanmarForeignTradeBank

MGMA

MyanmarGarmentManufacturerAssociation

MICB

MyanmarInvestmentandCommercialBank

MFI

MicroFinanceInstitution

MMK

MyanmarKyat

MoM

Month-on-Month

MOGE

MyanmaOilandGasEnterprise

MOPF

MinistryofPlanningandFinance

MHWS

MyanmarHouseholdWelfareSurvey

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MLCS

MyanmarLivingConditionsSurvey

MSME

Micro,SmallandMediumEnterprises

MUFG

MitsubishiUFJFinancialGroup

NPL

Nonperformingloans

OBS

OutwardBoundSingapore

OCBC

Overseas-ChineseBankingCorporation

PGMF

PactGlobalMicrofinanceFundMyanmar

PMI

PurchasingManagers’Index

POS

PointofSale

ROA

Returnonassets

ROE

Returnonequity

SOE

State-OwnedEnterprise

SEE

State-OwnedEconomicEnterprise

UK

UnitedKingdoms

UOB

UnitedOverseasBank

USD

USdollar

US

UnitedStates

USDAUnitedStatesDepartmentofAgriculture

WFPWorldFoodProgramme

YBSYangonBusServices

yoyyear-on-year

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ExecutiveSummary

Economicconditionshavedeterioratedinthepastsixmonths,withthesignsofrecoveryobservedinthefirsthalfof2023provingtobefragileandshort-lived.Macroeconomicvolatilityresumed,withthekyatdepreciatingbyaround18percentagainsttheUSdollaroverthethreemonthstotheendofSeptember.Morerecently,armedconflicthasescalatedacrossthecountry,severelydisruptinglivesandlivelihoods,blockingmajortransportroutesandtradechannels,andheighteninguncertaintyaroundtheeconomicoutlook.ThelatestavailableCPIdatarevealsinflationof28.6percentovertheyeartoJune2023,butthesubsequentkyatdepreciationandriseinconflicthasledtoafurtherincreaseinpricesintheperiodsince.Powershortageshavepersisted,creatingfurtherchallengesforbusinessesandhouseholds.Andwhiletheauthoritieshavemadearangeoffrequentandinsomecasespunitivemarketinterventions,theyhavegenerallybeenunsuccessfulinrestoringstabilityinkeyprices.

ConflicthasescalatedacrossmuchofMyanmarsinceOctobercausingdisplacement,laborshortages,andincreasedlogisticscosts

(FigureES1)

.TheUNestimatesthatmorethanhalfamillionpeoplehavebeennewlydisplacedduetotheriseinconflictsincelateOctober,addingtothe2millionpeoplewhowerealreadydisplaced.Armedclasheshavedisruptedvitaltraderoutes,particularlyinthenorthernShanstate,whichisamajorhubforbordertradewithChina.OperationsatseveralbordercrossingswithThailandandIndiahavealsobeendisrupted.ThishasimplicationsforMyanmar’sinternationaltradeacrosslandborders,whichaccountedfor40percentofitsexportsand21percentofitsimportsinthesixmonthstoSeptember2023.KeytransportrouteswithinMyanmarhavebeenblocked,restrictingthemovementofpeopleandtradeofgoods,andleadingtoshortagesoffoodandotherbasicitemsinlocalmarkets.

Renewedpressureontheexchangerateandinflationhasbeentriggeredbyacombinationofinternalandexternaldevelopments

(FigureES2

and

FigureES3)

.ThedepreciationcoincidedwiththeannouncementofU.S.sanctionsontwolargestate-ownedbanks,theimpositionofrestrictionsoncross-borderpaymentsbyinternationalbanks,andthelaunchofahigherdenomination20,000-kyatbanknotewhichfueledrenewedinflationanddevaluationexpectations.Fearsofareductioninforeignexchangeinflowsstemmingfromthesedevelopmentsreinforcedongoingpressureonthebalanceofpaymentsassociatedwithareductioninmerchandiseexports,amoribundinternationaltourismsector,andalackofforeigninvestment.Theresultingexchangeratedepreciationisbeingreflectedinpricepressureswhichhavebeenexacerbatedbyelevatedconflictandlogisticsconstraints.AccordingtoWFPdata,thepricesofsixmajorfooditems(rice,pulses,edibleoil,onions,eggsandtomatoes)haveincreasedbyanaverageof16.6percentannuallybetween2017andJune2023.Variouseffortstofixpricesoffuelandfooditemsatnon-marketlevelshaveresultedinsupplydisruptionsandinseveralcaseshaveprovenunsustainable.

Interventionstoencourageforeigncurrencyinflowsandregulateexchangerateshavegenerallybeenineffectiveinrestoringstability,whileexacerbatinguncertaintyandmarketdistortions.Foreigncurrencysurrenderrequirementshavebeenmaintained(thoughpartiallyeased),limitingMyanmarexporters’abilitytobenefitfromthedepreciatingkyat.However,thesemeasureshavedonelittletoaddressforeigncurrencyshortages.MultipleexchangeratesareinoperationinMyanmarandthespreadbetweentheofficialandtheparallelmarketratehaswidened,withpersistentshortagesofforeigncurrencyatthebelowmarketrates.Thisinturnhasconstrainedtheissuanceofimportlicenses,contributingtoshortagesofimportedinputsandconsumptiongoods.Atthesametime,alackofclarityaroundtheimplementationandenforcementof

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frequentlychangingandoftennon-transparentinstructionshasraiseduncertaintyandincreasedcompliancecosts.

Poweroutageshavepersistedthroughouttheyear,indicatingunderlyingstructuralchallengesintheenergysector.Outageshaveremainedseveredespitetheonsetoftherainyseason,whichinnormalcircumstancestendstostabilizehydropoweroutput.Thishasbeenlargelyduetoadropingas-generatedsupplyandconflict-relateddisruptionstopowertransmissionandgenerationinfrastructure.Powerblackoutsinresidentialareasandindustrialzoneshavelastedforextendedperiods,impactingbusinessesandhouseholds.Onaverage,recentlysurveyedgarmentfirmsestimatedtheirtotallossesattributabletopoweroutagestobeequivalentto31percentoftheirtotalannualsalesin2022,dueinlargeparttothecostofrunninggeneratorstosubstituteforpowerfromthegrid.

Againstthischallengingbackdrop,indicatorsofeconomicactivityhavegenerallydeterioratedsincemid-2023.IntheSeptember2023roundoftheWorldBankFirmSurvey,firmsreportedoperatingat56percentoftheircapacityonaverage,16percentagepointslowerthaninMarch2023

(FigureES4)

.Whileallfirmssufferedsetbacks,thereductioninoperatingcapacitywassteepestintheservicessectors,includingwholesaleandretailtrade,followingalargereporteddecreaseinsalesfromayearearlier.ThemanufacturingpurchasingmanagersindexcontractedinOctoberandNovemberasfirmsreportedadropinoutputandneworders

(Figure

ES5)

.Floods,conflict,highinputcosts,andtraderestrictionshavelimitedtheabilityoffarmerstobenefitfromfavorableexportprices,andcurtailedtheinvestmentsneededtosupportfutureproduction.Comparedwiththesameperiodayearearlier,merchandiseexportscontractedby11percentinthesixmonthstoSeptember2023,inpartreflectingslowingglobaldemand

(FigureES6)

.FDIcommitmentshaveremainedveryweak.

Meanwhile,fiscalspaceremainsconstrained,withawideningdeficitinlargepartfinanceddirectlybythecentralbank.Thefiscaldeficitwidenedto6.4percentofGDPintheyear-endedMarch2023,reflectingacontractioninrevenuethatmorethanoffsetamodestdeclineinspending.Spendingongoodsandservicesdeclinedbyalmost2percentagepointsofGDP,partlyoffsetbyanincreaseincapitalspending.Alarmingly,thecombinedspendingoneducationandhealthhasfallentoaround2percentofGDP,downfromalmost4percentin2019/20.Centralbankfinancingisestimatedtohavecoveredaround70percentofgrosspublicfinancingneeds(about4.8percentofGDP)intheyeartoMarch2023.

Householdincomescontinuetobestretchedbythecumulativeimpactofrecentshocks.Inthefirsthalfof2023,40percentofhouseholdssurveyedinIFPRI’sMyanmarHouseholdWelfareSurveyreportedlowerincomecomparedwiththepreviousyear,whileonly25percentreportedanincrease.Theanalysisfurthershowsthatmedianrealincomesfellby10.2percentbetweentheJunequarter2023andayearearlier.Foodpriceshaverisenfurtherfromalreadyhighlevels,outpacingthewageincreasesofmostworkers.ResultsfromIFPRI’sAgri-foodSystemMonitoringinMyanmarrevealedthatthecostofahealthydietincreasedby111percentbetweenJune2020toAugust2023.AnalysisbasedonMyanmarLivingConditionsSurvey(MLCS)andWFPsurveydatashowsthatpoorerhouseholdsareparticularlyexposedtohighfoodpriceinflation.Theincreaseofthedefactominimumwageby21percentinOctober–thefirstincreasesinceMay2018–willdolittletomitigatetheimpactsofthishighfoodpriceinflation(28.6percentinJune)onfoodsecurity.

Migration–bothwithinMyanmarandinternationally–hasbecomeanimportantcopingmechanism.

Outwardflowshavebeenspurredbyconflict,decliningrealincomes,andreducedeconomicopportunities.

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Migrantworkersareprimarilylow-skilled,withlittleformaleducation,andmainlyemployedinagriculture,construction,andmanufacturing1.TheWorldBankestimatesthatMyanmarworkersinThailandearnarounddoubletheamounttheyearnedathome,withtheremittancesthattheseworkerssendaugmentingtheincomesofMyanmarhouseholdsandfinancingexpendituresondailynecessities,housingandeducation.Ontheotherhand,increasingmovementsoflaboroutofMyanmarhaveledtoreportsoflaborshortagesinsomeareasandsectors,whiletheassociateddeclineinhumancapitalposeslonger-termdevelopmentrisks.

Inlightoftheseseverechallenges,near-termgrowthprospectshaveweakenedfurther.GDPisprojectedtogrowbyjust1percentintheyearendingMarch2024

(TableES1)

.Evenassumingnofurtherescalationinconflict,growthisexpectedtoremainsubduedthefollowingyear.Thisbaselineforecastispredicatedonabroad-basedslowdownacrossproductivesectors.Theagriculturesectorisparticularlyexposedtoconflict-relatedbordertradedisruptionswithoverathirdofagriculturalexportsgoingtoChina,IndiaandThailandvialand.Growthinthemanufacturingsectorisprojectedtoslowgivenongoingelectricityshortagesandworseninglogisticsdisruptions,combinedwithslowingexternaldemand.Wholesaleandretailtradewillremainsubduedgivenpersistentdownwardpressureonhouseholdincomesandupwardpressureonconsumerprices.TheforecastimpliesthatGDPin2024wouldstillbearound10percentlowerthanin2019,indicativeofthepersistentimpactsofrecentshockstoboththesupplyandthedemandsideoftheeconomy

(FigureES

7)

.NotethatthemacroeconomicindicatorsinTableES1–bothhistoryandprojections–havebeenalignedtotheMarch-endedfiscalyear

(Box4

providesmoredetails).Theunderlyingquarterlydataandassessmentofthemacroeconomictrajectoryintherecentperiodremainsunchanged.

TableES1Economicdataandprojections

(annualpercentchangeunlessindicatedotherwise)

2019-20

2020-21e

2021-22e

2022-23e

2023-24f

2024-25f

2.0

RealGDPgrowth,atconstantfactorprices

6.6

(9.0)

(12.0)

4.0

1.0

Agriculture

2.2

(5.7)

(12.8)

(2.2)

(2.8)

4.0

Industry

8.0

(11.8)

(8.2)

8.0

1.5

2.8

Services

7.8

(8.4)

(14.7)

3.9

2.5

0.212

(6.7)

CPIinflation,yearaverage

9.1

2.3

9.6

27.2

20.1

Tradebalance(%ofGDP)

(5.6)

(2.9)

(2.4)

(6.0)

(6.8)

Currentaccountbalance(%ofGDP)

(1.8)

(0.4)

(2.4)

(6.3)

(6.7)

(6.1)(5.1)

Fiscalbalance(%ofGDP)

(6.2)

(7.5)

(4.7)

(6.4)

(5.7)

Publicdebt(%ofGDP)42.354.661.562.661.561.1

Note:April-Marchfiscalyear

InflationisexpectedtoremainhighintheyearendedMarch2024,ataround20percent.Whileseveralpriceseasedinthefirsthalfof2023,therecentre-emergenceofexchangeratepressuresislikelytoseepricescontinuetoriseatarapidpacethisyear,withmodellingforMyanmarindicatingthata1percentdepreciationintheexchangeratetypicallyassociatedwithanadditional0.5percentriseinconsumerpricesoverthenextonetotwoquarters.Relativelyhighinflationisexpectedtopersistoverthenextcoupleofyears,drivenbyongoingpressureonthebalanceofpaymentsandkyatexchangerate,localsupplyconstraintscausedbyconflict,tradeandtransportdisruptions,andtherenewedrelianceoncentralbankfinancingofbudgetdeficits.

1InternationalOrganizationforMigration(IOM),(2023).FlowMonitoringFindings:ProfilesOfMyanmarNationalsCrossingintoThailand.

/report

-product-series/flow-monitoring-myanmar-nationals

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Balanceofpaymentspressuresarealsoexpectedtopersistoverthemedium-termwithaprojectedwideningofthetradeandcurrentaccountdeficits,to6.8and6.7percentofGDP,respectively,duemainlytoananticipatedslowdownofexports.Recentdisruptionsofthelogisticsandsupplychainsduetoconflictcouldreducenetservicesreceiptsbutremittanceinflowsareexpectedtocontinuerecoveringduemainlytothecountry’slargemigrantworkforceandtheexistenceoffavorableclose-to-marketexchangeratesforremittances.Financingthecurrentaccountdeficitwillremainchallengingduetolowforeigninvestment,whilethereisalackofclarityaroundtheauthorities’abilityandwillingnesstodrawdowninternationalreserves.

Theoverallbudgetdeficitisprojectedtoremainelevatedat5.7percentofGDPinthefiscalyearendingMarch2024.RevenuesfromSEEsareprojectedtomoderatesharplyreflectingincreasedoperationalchallengesandlosses.Spendingisalsoprojectedtodeclineby2.2percentagepointsto24.0percentofGDP,reflectingdeclinesinbothrecurrentandcapitalexpenditure.Spendingoneducationandhealthcombinedisexpectedtobejust2.2percentofGDP,equivalenttojustoverhalfoftheallocationtodefense.Totalpublicdebtisexpectedtoremainbroadlystableatjustabove60percentofGDP,withtheimpactofbudgetdeficitsonthedebt-to-GDPratiocontinuingtobebroadlyoffsetbyfasterinflation.

Therearesignificantdownsiderisksassociatedwiththeseprojections,withtherecentriseinconflictbroadeningtherangeofpossibleoutcomesintheshort-andmedium-term.Inadditiontoitsimpactsoninternaldisplacementandlivelihoods,theescalationinfightinghasthepotentialtoblockvitallandtradeandsupplychains,sharplycurtailmobilityandconsumption,anddisruptbusinesses’abilitytooperate.Otherrisksincludetheriskofpoweroutagesworseningfurther,theriskoftradedisruptionsfollowingrecentrestrictionsoncross-borderpayments,andtheriskofmoreprotractedshortagesofforeigncurrencyandimportedinputsresultingfromtheimplementationofpricecontrolsandothermarketinterventions.Mediumtolong-termprospectsforlivingstandardsareatconsiderableriskduetobroad-baseddeclinesinrealwagesandlaborproductivity,aswellasawidespreaderosionofhumancapital.Inaddition,policyresponsesthatrelyheavilyonmarketinterventions-suchaspricecontrolsandtraderestrictions-arelikelytoamplifyrisksofgrowinginefficienciesa