The economic landscape in Bhutan witnessed a significant shift in 2022 as the trade deficit soared to approximately Nu 78.24 billion (bn), marking a staggering increase of 99.28% compared to the deficit of Nu 39.26 bn recorded in 2021. These revelations come from the National Accounts Statistic Report for 2023.
This escalating trade deficit accounted for a noteworthy 34.35% of the country’s Gross Domestic Product (GDP). After adjusting for inflation, the real trade deficit in 2022 witnessed a substantial increase of 58.54% compared to the 25.04% trade deficit recorded in 2021, representing a 33.49% point surge in real terms.
The surge in the trade deficit is primarily attributed to a decline in the export of goods and services in 2022, registering a contraction of -8.10%. This decrease of 9.14% points compared to 2021 contributed significantly to the trade deficit. The export of goods, in particular, experienced a negative growth rate of -8.34%, accounting for 96.79% of the total export. On the other hand, the export of services constituted a smaller share, at 3.21%, and continued its contraction for the third consecutive year, with a -0.32% decline in 2022.
In terms of value, the total export of goods and services at current prices amounted to approximately Nu 58.75bn in 2022, representing 25.79% of the GDP. This marked a decline of 3.41% points compared to the previous year.
Conversely, the total value of imports of goods and services at current prices surged to about Nu 137bn in 2022, a significant increase from the Nu 99.02bn recorded in 2021. This increase accounted for 60.14% of the GDP.
Among these imports, goods held the larger share at 84.32%, while services accounted for the remaining 15.68%. The growth rate of imports of goods and services accelerated to 17.14% in 2022, marking an 8.18% point increase from the 8.96% growth observed in 2021. Notably, imports of goods saw a substantial increase of 44.06%, while services imports grew by 5.21% compared to 2021.
The National Accounts Statistic Report, which focuses on the GDP by expenditure or final demand approach, emphasizes three key economic aggregates: Final Consumption Expenditure (FCE), Gross Domestic Capital Formation (GDCF), and exports and imports.
Final consumption expenditure (FCE) registered a 3.10% increase in 2022, compared to a mere 0.17% growth in 2021, marking a 2.92% point increase. In nominal terms, FCE amounted to Nu 178.98bn, representing 78.57% of the GDP for 2022. Private final consumption expenditure of households and non-profit institutions serving households (NPISHs) accounted for 73.25% of FCE in 2022.
Private final consumption expenditure experienced a robust growth rate, surging to 5.55% from a negative -2.41% in 2021. At current prices, private final consumption expenditure reached approximately Nu 131.10bn in 2022, making up 57.55% of the GDP, an increase of 5.43% points compared to the previous year.
In contrast, government final consumption expenditure (GFCE) constituted 26.75% of the total final consumption expenditure, down by 0.04% points from its share of 30.31% in the previous year. At current prices, GFCE was estimated at about Nu 47.88 bn in 2022, making up 21.02% of the GDP. However, it witnessed negative growth of -2.32% in 2022, a stark contrast to the 6.37% growth seen in 2021, representing an 8.69% point decrease.
The Gross Domestic Capital Formation (GDCF) experienced a remarkable resurgence, growing by 28.84% in 2022 after three consecutive years of contraction. This marked an 8.88% point increase compared to the previous year, contributing 13.15% points to the GDP growth for the year. The construction sector held a significant share within GDCF, accounting for 41.09% and recording a growth of 17.84% in 2022.
The upswing in construction investment is attributed to increased government expenditure on construction projects and the easing of pandemic-related restrictions in the sector. Investment in machinery and equipment also saw robust growth, with a 41.30% increase in 2022, an increase of 4.93% points compared to 2021.
The surge in the trade deficit and changes in various economic aggregates signals a shifting economic landscape in Bhutan, with challenges and opportunities to navigate in the coming years.
Sherab Dorji from Thimphu