The World Bank said on Tuesday that Myanmar's economy contracted by an estimated 2.0 percent in the 2025/26 fiscal year, with a fuel shock triggered by tensions in the Middle East intensifying existing pressures on output, inflation, and household welfare.
According to the World Bank's latest Myanmar Economic Monitor, economic activity showed modest improvement through late 2025 and early 2026, supported by partial normalisation following the March 2025 earthquake, some easing of power supply constraints, and pockets of resilience in manufacturing, construction, and services. However, output, sales, and profits remained well below pre-2021 and pre-earthquake benchmarks.
A fuel shock driven by tensions in the Middle East in early 2026 has compounded these challenges. Higher fuel prices have raised transport and logistics costs, increased production and distribution expenses, and intensified foreign exchange demand for fuel imports. After easing through late 2025, inflation rose sharply from March 2026, reaching 24.6 percent year-on-year in April, further straining household welfare, particularly among vulnerable populations.
"While there are signs that economic conditions have stabilised, Myanmar's economy remains under significant strain," said Melinda Good, World Bank Division Director for Thailand and Myanmar. "Recent shocks continue to expose deep structural vulnerabilities, and without sustained improvements in the operating environment, recovery is likely to remain fragile."
The World Bank projected growth of 2.0 percent in FY2026/27, revised down from 3.0 percent prior to the fuel shock. The report highlighted persistent risks including continued conflict, disruptions to trade and logistics, and external pressures such as weaker export earnings and global energy price volatility.
The private sector continues to operate in a challenging environment, according to the report. Businesses face rising costs, administrative burdens, and uneven policy implementation, with many firms focused on survival rather than expansion, weakening prospects for job creation and income recovery.
"Many of Myanmar's business challenges stem from weak implementation of formal rules and inconsistent service delivery," said Kemoh Mansaray, World Bank Senior Economist. "Greater predictability and better coordination will be key to supporting firms, restoring confidence, and unlocking growth."
The report's findings underscore the impact of overlapping crises on Myanmar's economy since the military takeover in 2021. The combination of conflict, earthquake damage, power supply shortages, and now fuel price inflation has left businesses operating under severe pressure.
The World Bank pointed to conflict, trade and logistics disruptions, weaker export earnings, energy-price volatility and inconsistent policy implementation as major constraints on recovery.
Sources: World Bank, Reuters.
