Bhutan’s economy to grow by 5.3% in 2023

In 2023, the GDP of India is expected to grow by 6.7% and the GDP forecast for Bhutan will be around 5.3%, according to Finance Minister

Bhutan’s economic growth in 2023 is expected to grow to 5.3%, from 4.5% in 2022, Finance Minister Namgay Tshering said during the 48th meet-the-press on January 20, 2023.

Lyonpo shared that the Gross Domestic Product (GDP) of Bhutan goes parallel with the GDP of India, which, the country follows the same trend as the currency is equivalent to the Indian rupee. Based on the historical trend, by 2023 the GDP of India will grow by 6.7% and the GDP forecast for Bhutan will be around 5.3%.

That means, growth is likely to re-accelerate as global growth recovers, drag from net exports diminishes and the investment cycle picks up.  

However, the Asian Development Bank (ADB) projected Bhutan to grow by 4.5% in 2022 before picking up to 7.5% in 2023, assuming that the economic activities will resume and gradually grow in the tourism sector of the country.

Lyonpo said that currently, GDP is not that important at this point of time. “There are some fundamental issues on the micro economic perimeter with the country’s economy and it needs to be resolved first,” Lyonpo said, adding that the choice is whether we focus on the GDP growth rate or fix the microeconomic perimeter imbalances.”

“First choice, we would be fixing anomalous in the economic fundamentals issues rather than the GDP rate,” Lyonpo said.

Lyonpo explained that the calculation of the GDP is based on two methods, the income approach method and the expenditure approach method, which, Bhutan is mostly the expenditure approach method.

“In order to get better GDP, it is important to invest, adapt and expand fiscal stands and expand the fiscal policy,” Lyonpo said, adding that when the investment is more, we need to have an adequate reserve to sustain and that is why the current critical issue isnot to focus on the GDP status.

According to Lyonpo, the microeconomic fundamentals and perimeter are no different from an understanding of the economist but also it is a similar condition as the trade deficit and the trade deficit is synonymous with the current account deficit.

“We have to fix the trade deficit and contain the import rational and focus on microeconomic fundamentals,” Lyonpo added.

However, the government expenditure is around 37% to 38%, which means, Lyonpo said currently, the GDP is a bit comfortable. “Currently, the economy of the country is not good with the very high-cost escalation and the government has decided that it is not the right time to invest and try to rationalize and optimize the public expenditure,” he said.

Further, Lyonpo added that if there is more government expenditure including ongoing government infrastructure, this year, the GDP will be lingering between 3.5% to 4%.

Meanwhile, the globally advanced economy and the emerging economy show that the entire advance GDP has downgraded by significant figures as per the latest World Bank report. While the GDP of the US has downsized to almost 1.1% and the forecast of our GDP is not that bad as compared to advance and emerging countries.

The dollar reserve has decreased and needs to rationalize import, Lyonpo said, “I think we have to go on with one prominent solution so that future anomalous will be resolved.” 

According to Lyonpo, the global covid pandemic and the Ukraine-Russia war have also led to a rise in food and energy prices, dollar to appreciate compared to Ngultrum. “It is all uncertain things and we are still vulnerable to these uncertain things and external shocks,” he said. 

Sherab Dorji from Thimphu