Decline in economy growth rate will have no impact on standard of living, says PM

Bhutan’s GDP is projected at 3.3% in the next fiscal year 2021-2022

The decline in the economy growth rate or Gross Domestic Product (GDP) would not impact the standard of living of the people, said Prime Minister Dasho Dr Lotay Tshering during the virtual Press Meet in Thimphu yesterday.
The finance ministry had forecasted a positive economy trajectory for the fiscal year 2021-2022 with a growth of 3.3%. However, the ministry will release this year’s quarterly GDP report soon.
Before the pandemic, the GDP in 2020 was projected to grow at 6.5% and after the pandemic arrived in the country, the government estimated the GDP growth at 1%.
With the first lockdown in the country, the GDP growth rate was revised to -2.1% and with the second lockdown, it has been further revised downward to -6.8%.
According to the recent annual report of the Asian Development Bank, Asian Development Outlook report projected Bhutan’s economic growth rate would contract by 3.4% in fiscal year 2020-2021. However, it would rebound to 3.7% in fiscal year 2021-2022.
Additionally, the report states that the GDP per capita that indicates the standard of living would be down to -4.4% and is expected to improve by 2.7% in the fiscal year 2021-22.
“Assuming the nationwide vaccination drive that would restore mobility and economic activity, the government markedly boosts investment spending, and the global economic recovery revives tourism, albeit moderately, and trade with India the GDP is expected to grow,” it added.
“There has not been an impact on the livelihood of the people when the pandemic was and is now, other than the physical restriction and mental stress of getting infection and country going into lockdown,” said Lyonchhen.
Additionally, Lyonchhen said the declining GDP and GDP per capita would be very difficult situation in formal well calculated economic scenario, adding that every point increase or decrease in the GDP would have greater impact.
Lyonchhen said Bhutan having a small economy, even one lockdown can dip the GDP growth by 3 to 4 points, however, will have lesser impact.
Lyonchhen said the income of top-line business people are affected by the pandemic and are in severe debt, however, those with Bhutan’s GDP per capita of about USD 3,400 and below are not affected.
“GDP contributions are basically from government expenditure, private sector, construction sector, and individual consumption,” the PM said, adding that under His Majesty The King’s Kidu relief fund, almost Nu 12bn has been disbursed in the last one year to those who have lost their income.
“Individual consumption capacity has not dropped and it has been like before the pandemic,” said Lyonchhen.
Economic Affairs Minister Loknath Sharma said GDP either consumption or spending method, if we look at consumption side, the GDP might be the same as Kidu is direct consumption.
“This is the beauty of GNH economy, it is reflection of fallacy of GDP style of measurement,” he added.
Finance Minister Namgay Tshering said the ADB’s forecast is on considering the regional growth and they have done the simulation at the regional level and overall nutshell, but it is not definitive.
Additionally, he said it has been trickled down in Bhutan’s context because the economy is mostly trading based economy with more import driven and export.
“The impact on economy growth rate since the first COVID-19 case in Bhutan, mostly due to services sector, tourism, and unless the restrictions are lifted it would not contribute to the economic growth,” the minister said, adding that others being manufacturing sector, production and industrial sector.
“Comparing to two previous quarters of 2020, we have significantly achieved and the growth has been regained in the industrial sector,” said Lyonpo. Given the sheer size of the country’s economy and volatility, although the growth rate is negative we will experience a V-shaped economic recovery trajectory.
“Our concern on economy and livelihood is as strong as the pandemic; there is no way we can control,” said Lyonchhen.

Thukten Zangpo from Thimphu