Manufacturers in Myanmar are optimistic about a recovery in production over the next 12 months, with a number of firms reporting plans to expand capacity, according to the consultancy IHS Markit. The improving sentiment comes even as the majority of Myanmar firms said they were not doing well as a result of COVID-19.

Myanmar's manufacturing sector showed signs of recovery in June even as the authorities continued measures to contain the COVID-19 outbreak, according to the latest Purchasing Managers' Index (PMI) survey conducted by IHS Markit.The survey highlighted that output and new orders both increased for the first time in four months even though employment continued to decline.

"Myanmar's goods producers showed signs of emerging from the coronavirus crisis in June. The PMI recovered further ground, repeating the near-ten point rise seen in May. It remained below 50.0, but the key indices for new orders and output both returned to growth territory for the first time since February," Trevor Balchin, Economics Director at IHS Markit, said.

He added that this would normally be a good indication that output growth will be sustained in the near term as firms look to replenish inventories, but said this was premised on the pace of global recovery, and barring a second wave of cases.

The headline IHS Markit Myanmar Manufacturing PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stock purchases. Any figure greater than 50.0 indicates overall improvement of the sector.

Myanmar registered a score of 48.7 in June on the PMI, up from 38.9 in May and 29.0 in April. New orders and output rose sharply in June compared to May, signaling a return in demand and activity in Myanmar.

However, the score remained below 50.0 as a result of the workforce contraction, even though employment levels have yet to recover, the number of layoffs registered in June is lower than the previous two months.

Myanmar's PMI score for the month of June was interpreted as a positive sign for the economy, with Investment and Foreign Economic Relations’ Minister U Thaung Tun noting on Twitter this is the first time in four months that output and new orders have increased.

However, even though business sentiment in the manufacturing sector had improved after falling to a 14-month low in April, the majority of firms in Myanmar said that business had slumped, according to a survey of 2000 local companies conducted by the Myanmar Marketing Research and Development Company (MMRD).

Released on July 2, results of the MMRD's Business Sentiment Survey, showed that as of June 30, 90 percent of respondents indicated that their business is not doing well compared to 72 pc in October 2019 and 81pc in October 2018.

Almost all this year's participants said COVID-19 had affected their businesses either moderately or severely. A major reason for Myanmar’s businesses is performing well because of the COVID – 19 pandemic with 94 percent of respondents starting that the crisis had an impact on their businesses.

The survey also found that six out of 10 businesses have no confidence that the economic landscape will recover in the next three months.

The Business Sentiment Survey has been regularly conducted since 2016, and is a major indicator used by the Union of Myanmar Federation of Chambers of Commerce and Industry to lobby the government on issues in order to create solutions for private businesses in Myanmar to perform better.