Financial Crime World

Myanmar’s Economy in Peril: Country on the Brink of Financial Watchdog Blacklist

Myanmar is facing the prospect of being added to the Financial Action Task Force (FATF) “call for action” blacklist, dealing a severe blow to the military junta’s economic ambitions.

FATF Blacklist: What Does it Mean?

Myanmar’s unsatisfactory progress in tackling organized crime and money laundering may lead to its addition to the FATF blacklist, joining North Korea and Iran (Nikkei Asia, 2022). A Western diplomat involved in FATF discussions noted that if the majority favors adding Myanmar to the list, Singapore, which holds FATF presidency, would not oppose.

Consequences for Myanmar’s Financial Institutions

Myanmar’s placement on the blacklist would signify a significant downturn for the country’s financial institutions. They would become outcasts from the international financial system, requiring additional reporting checks and increasing the challenges for banks and businesses dealing with Myanmar’s financial entities.

Economic Collapse since the Coup

Since the coup in February 2021, Myanmar has experienced an alarming economic collapse. According to Fitch Solutions, Myanmar’s economy is projected to shrink by 5.5% in the financial year to September 2022, in contrast to its contraction of nearly 18% the preceding year. Foreign investors have fled the economy, causing the kyat currency to plummet and intensifying living pressures for the population.

Economic Indicators after the Coup:

  • Gross Domestic Product (GDP): Contracted nearly 18% the preceding year
  • Kyat Currency: Plummeted
  • Living Pressures: Intensified
  • Foreign Investors: Fleed the economy

Long-term Economic Prospects

Fitch expects that economic conditions in Myanmar will remain challenging and does not forecast recovering the lost economic output until at least the 2028 financial year.

The Military Junta’s Response

Despite the grim economic situation, [Myanmar’s rulers appear unconcerned with foreign capital exodus](BBC, 2022). Actions like the arrest of Vicky Bowman, a former UK ambassador and business advisor, signal the junta’s disregard for Western opinion. The FATF blacklisting may accelerate Myanmar’s downward economic spiral and force the military regime to rely even more on a select group of foreign entities.

Repercussions: Military Brass or the Public?

It remains uncertain if the repercussions of this economic punishment would target the military brass or the long-suffering Myanmar public the most. Regardless, the country’s path out of its quagmire is likely to be long, turbulent, or both.

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