GDP growth to rebound to 4.5% in 2022: Finance Minister

๐‘ป๐’‰๐’† ๐‘ฉ๐’‰๐’–๐’•๐’‚๐’๐’†๐’”๐’† ๐’†๐’„๐’๐’๐’๐’Ž๐’š ๐’Š๐’” ๐’†๐’™๐’‘๐’†๐’„๐’•๐’†๐’… ๐’•๐’ ๐’ˆ๐’“๐’๐’˜ ๐’ƒ๐’š 4.5% ๐’Š๐’ ๐’•๐’‰๐’† ๐’‡๐’Š๐’๐’‚๐’๐’„๐’Š๐’‚๐’ ๐’š๐’†๐’‚๐’“ 2022-23 ๐’˜๐’Š๐’•๐’‰ ๐’”๐’Š๐’ˆ๐’๐’” ๐’๐’‡ ๐’Š๐’Ž๐’‘๐’“๐’๐’—๐’†๐’… ๐’†๐’„๐’๐’๐’๐’Ž๐’Š๐’„ ๐’‘๐’†๐’“๐’‡๐’๐’“๐’Ž๐’‚๐’๐’„๐’†.

Finance Minister Namgay Tshering said, during the presentation of the budget report for the fiscal year 2022-23 in the Nation Assembly, that government remains hopeful and reinforces its commitment to devote all-out efforts to step up the work in support of the economy.

โ€œWith this, we are positive that our economy will put up a better performance during this financial year and achieve the targets set in this budget,โ€ Lyonpo said.

Lyonpo shared that the resumption of economic activities began in the first quarter of 2021, restoring mobility and leading to an increase in government spending. Manufacturing output grew, as industrial production improved.

While upside risks to inflation and external shocks remain, Lyonpo shared that the growth prospects have improved against the backdrop of rapid vaccination roll-outs backed by swift and strong policy responses by the Government and transition to Phase II of COVID-19 management.

However, the economy was on the verge of recovery supported by high rates of booster vaccines and the lifting of additional pandemic-related restrictions. The global economic fallout of the Russia-Ukraine conflict continues to weigh heavily on the economy of the country through increased energy and commodity prices.

The finance minister said that the terms of trade also saw an improvement with exports excluding hydropower increasing to an all-time high at 61% during 2021 as compared to its previous years. โ€œThis increase is one of the highest compared to any pre-pandemic years,โ€ he said.

Similarly, in an import-driven economy, Lyonpo said that a key aspect to ascertaining the level of economic activities taking place in the economy is imported. Overall imports witnessed a substantial increase of almost 36% in 2021 as compared to 2020.

โ€œWith the initial deceleration in GDP growth during 2020, the year 2021 exhibited a positive economic outlook as economic activities started to pick up. Going forward, both exports and imports are expected to expand owing to improved trade and strong foreign and domestic demand.โ€

Meanwhile, the agricultural sector remained the silver lining of the economy during the pandemic with the implementation of various programs under ECP to boost agriculture and livestock production for food self-sufficiency, nutritional security, and income generation.

Lyonpo shared that with the major transformative pathways undertaken to achieve food security and a steady supply of high-quality essential produce, the agricultural sector is estimated to gradually grow at 3.3% and 2.3% in 2021 and 2022 respectively.

The industry sector was severely hit by the pandemic, recording a contraction of 13.1% in 2020 from positive growth of 2% in 2019, Lyonpo said adding the impact would have been much higher had it not been for the hydropower sector, which remained unaffected by the pandemic.

In 2021 the industry sector is estimated to grow at 4.9% and 4.1% in 2022 as construction activities pick up with the surge in capital spending and relaxation in labour imports.

The service sector which is mainly driven by tourism, finance, and government services recorded negative growth of 6.9% in 2020 as compared to positive growth of 13.2% in the previous year.

In line with the drastic fall in tourist arrival, the performance of sub-sectors including hotels & restaurants and transportation were also severely affected. Wholesale & retail trade, and financing, insurance, and real estate services were also impacted due to supply chain disruptions at the border and poor performance of the financial sector.

The service sector is estimated to grow to 3.1% in 2021 due to broad-based improvement in all the sub-sectors despite being weighed down by international travel restrictions.

โ€œWith the gradual opening of the tourism sector and no mobility restrictions imposed, the consumer demand will be elevated thereby accelerating the overall service sector output by 5% in 2022,โ€ Lyonpo said.

According to Finance Minister Namgay Tshering, global economic scenarios are changing overnight, Bhutan remains firm in expressing that inflation will return to its pre-pandemic rates if supply-side disruptions dissipate and global food and energy prices stabilize.

Under the baseline scenario, Lyonpo said that annual inflation is forecasted to fall to 5.2% in 2022 and 3.5% in 2023, returning to its pre-pandemic level.

Similarly, an improvement in the unemployment rate is anticipated with labour supply and demand gradually improving over the medium term, the unemployment rate is projected to subside further in the coming years.

However, the speed of employment recovery will be slower than anticipated and would take a minimum of three years to reach the pre-pandemic level, Lyonpo said.

Staff Reporter from Thimphu