A bleak Bhutanese economy in 2024

Forecasters say corresponding impacts to be felt in 2024 through recession and sluggish economic activities, resulting in percentage points drop on GDP

The Bhutanese economy in general indicates an unconvincing demeanor in the last quarter of this year and the entirety of next year, although a hint of positivity radiates in specific cases as forecasted by economic experts.

The rate of inflation in the country which is actually hovering at 5 percent is however forecasted to subside to 3.4 percent by the end of next year. The inflation rate in Bhutan increased to 5.03 percent in September from 4.75 percent in August of this year. Inflation rate in Bhutan averaged 5.28 percent from 2001 until 2023, reaching an all time high of 13.53 percent in June of 2012 and a record low of 0.00 percent in March of 2004.

On the currency exchange front, the rate of Ngultrum (BTN) against the US Dollar (USD) is forecasted an uphill stride with a USD costing as high as BTN 85.38 by the end of the last quarter of 2024. The current rate is BTN 83.25.

The USDBTN decreased 0.0458 or 0.06 percent to 83.2392 on Thursday, November 2 from 83.2850 in the previous trading session. Historically, the Bhutanese Ngultrum reached an all time high of 83.44 in August this year.

On other dimensions, the Gross Domestic Product (GDP) Annual Growth Rate is at a current rate of 5 percent. The GDP in Bhutan expanded 5.20 percent in the fourth quarter of 2022 over the same quarter of the previous year. GDP Annual Growth Rate in Bhutan averaged 6.74 percent from 1996 until 2022, reaching an all time high of 17.90 percent in 2008 and a record low of -10 percent in 2020.

The current unemployment rate is at 3.2 percent of the total population and is expected to remain the same until the end of this year. The Unemployment rate in Bhutan increased to 5.90 percent in 2022 from 4.80 percent in 2021. Unemployment rate in Bhutan averaged 3.00 percent from 1995 until 2022, reaching an all time high of 5.90 percent in 2022 and a record low of 1.15 percent in 1997, according to Trading Economics global macro models and analysts expectations.

Bhutan’s current account to GDP stands at -28 percent while the country’s current debt to GDP stood at 129 percent as of November 3.

Bhutan recorded a current account deficit of 33.80 percent of the country’s GDP in 2022. Current account to GDP in Bhutan averaged -17.20 percent of GDP from 2001 until 2022, reaching an all time high of 15.80 percent of GDP in 2007 and a record low of -33.80 percent of GDP in 2022 according to the Royal Monetary Authority (RMA) of Bhutan.

Foreign Exchange Reserves in Bhutan increased to USD 573.61 million in June from USD 549.08 million in May this year. Foreign Exchange Reserves in Bhutan averaged USD 937.33 million from 2006 until 2023, reaching an all time high of USD 1902.60 million in July of 2016 and a record low of USD 458.30 million in April of 2006.

The interest rate, which is 6.8 percent actually as of November 3, is forecasted to rise by upto 7.4 percent by the last quarter of this year and is expected to remain that way for the remainder of next year.

The benchmark interest rate in Bhutan was last recorded at 6.85 percent. Interest rate in Bhutan averaged 6.42 percent from 2012 until 2023, reaching an all time high of 7.16 percent in March of 2022 and a record low of 6.00 percent in July of 2012.

The balance in growth for the Bhutanese economy at large was projected, by numerous analysts, to slow from 4.7 percent in 2022 to 4.6 percent this year, and 4.2 percent in 2024 by a large net financial account inflow, if errors and omissions are included, and by drawing down gross foreign exchange reserves by USD 215.0 million.

Overall, Bhutan’s economic growth rate is expected to slow down to three percent in 2024, according to the International Monetary Fund’s (IMF) latest World Economic Outlook report. The 2024 number is a 2.3 percentage point drop from the 5.3 percent growth projected for this year.

Tashi Namgyal from Thimphu