Economy in Doldrums: Dips past minus10

With no respite at sight, the economy is expected to tumble further down in the coming months

By Phurpa Wangmo

Bhutan’s economy recorded a growth of -10.08 percent in 2020, by far the lowest.

This is one of the most striking figures, which is 15.83 percentage points drop as compared to a growth of 5.76 percent in 2019.

The National Accounts Statistics 2021, published by NSB, states that Bhutan’s economy, for the first time since its recorded history, saw the lowest dip of 10 (minus).

According to NSB the key sectors that contributed to the contraction of the economy were the mining and quarrying sector at -81.84 percent and the hotel and restaurants sector which also dipped at -73.46 percent.

The report throws further gloom and apathy into the manufacturing, construction, and the transport and communication sectors to a mere -20.76 percent, -20.64 percent, and -14.65 percent respectively.

Further, finance and insurance, wholesale and retail trade and other business services have also contracted largely contributing to the overall contraction of the economy in 2020.

Further, the trade deficit in 2020 had further increased by 6.28 percent as compared to -34.36 percent in 2019.

The Gross National Income (GNI) percentage also recorded a growth of -7.23 percent in 2020, which is a drop of 12.92 percentage points compared to 2019. NSB states the decline in growth in GNI in 2020 was due to a higher outflow of primary income and also because of the drop in GDP.

“The primary income outflow to the Rest of the World in 2020 was recorded at Nu 12,427.29 million as against Nu 1,841.83 million primary income received. Therefore, the net primary income from the rest of the world was recorded at Nu -10,585.46 million which has led to a drop in GNI,” the NSB report states.

According to the report the global GDP per capita in 2020 declined to Nu. 229,090.40 (US $ 3,129.86) from Nu. 240,755.66 (US $ 3,418.83) in 2019 and in real terms, it declined by 10.95 percent registering a drop of 15.66 percentage points from 4.71 percent in 2019.

It further claims the per capita Gross National Income (GNI) in 2020 observed a drop of 8.92 percent compared to 4.65 percent growth in 2019, down by 12.78 percentage points.

Inflation and savings

The National Statistical Bureau, in their latest report, states the annual price change (inflation) measured by Consumer Price Index (CPI) was recorded at 5.63 percent in 2020, which was an increase of 2.90 percentage points from 2.73 percent in 2019.

Further, the economy in 2020 noted a gross national savings of Nu 29,730.68 million in 2020 as against Nu. 40,146.19 million in 2019, which is a drop of Nu. 10,415.52 million.

“Of the total national savings, government savings was Nu. -23.19 million and private savings, which includes households, private and public corporations, stood at Nu. 29,753.86 million,” it states, adding the increased government final consumption expenditure (GFCE) plus record drop in economic performance, and decline in the inflow of primary and secondary income from the Rest of the World resulted in the fall of the National Saving.

And like in the past years, the gross national savings failed to meet the investment requirements of the economy. In simple terms investment recorded a drop of -14.27 percent in 2020 as against the negative growth of -16.51 percent in 2019.

However, the fall in investment has improved by 2.24 percentage points as compared to the previous year.

According to NSB the drop in both Investment and National Savings in the economy has led to fall in the saving-investment (SI) ratio to 0.51 in 2020, as compared to 0.59 in 2019, which means the national saving in 2020 was able to finance only 51 percent of domestic investment as against only 59 percent in 2019.

Agriculture, Livestock, and Forestry

The report further elucidates that in 2020, the primary sector recorded a growth of 4.57 percent, an increase of 3.27 percentage points from 1.30 percent in 2019. This was one of the highest growths compared to the past five years.

The sector contributed 0.47 Figure 3.2 GDP growth Contribution (% points) and GDP growth (%) percentage points to the GDP growth in 2020.

“The improvement in the rate of growth in the sector was due to the better performance of all the three sub-sectors. The agriculture sector continued to be the main driver of the primary sector’s growth,” NSB states.

The industry sector’s growth dropped to an all-time low of -13.10 percent in 2020 from positive growth of 2.01 percent in 2019, down by 15.11 percentage points as compared to the previous year. Further, the sector’s contribution to GDP growth was recorded at -5.04 percentage points.

Within the sub-sectors, in the mining and quarrying, and construction sectors were the main sectors that led to a fall in the growth of the sector.

“Other than the general government and health and education sub-sector, all other sub-sectors under the Tertiary sector recorded negative growth. Hotel and restaurant, and recreational services sub-sector recorded one of the highest drops in growth with -73.46 percent and 39.48 percent respectively.”

In terms of crops production it recorded a growth of 5.07 percent in 2020 as compared to 2.12 percent in 2019, which is an increase of 2.96 percentage points from the previous year.