10 percent GDP growth looks less likely

Projections from the World Bank reveal around 6% growth in 2013-17 period

Projections: The government may not achieve an economic growth of 10 percent during its tenure and, going by the World Bank’s projections, the gross domestic product (GDP) may hover around six percent on an average between 2013 and 2017.

The World Bank, in its multi poverty outlook, published recently, projects a growth of 5.7 percent in 2014, after experiencing an all time low growth of 2.05 percent in 2013.   In the subsequent years it is projected that the economy would grow by 6.9 percent, 6.8 percent and 7.6 percent.

Additional drivers of growth in 2014, according to the report, were the hydropower construction, which is back on track after geological delays, the five-year plan implementation in full swing, a record level of tourists, promotions and public consumption boosted by an increase in wages.

In 2015 economic activity is again expected to gain momentum, driven by new hydropower construction and innovative tourism measures like Visit Bhutan year.

If these projections turn out as estimated, the government will not achieve its target, despite all the hydropower activities on full swing and other initiatives on the economic front.

However, during the meet-the-press session on May 7, the economic affairs minister, Norbu Wangchuk, said the economy was already showing signs of a robust economy.  But to achieve growth in double digits, he said it was important to understand the reality.

“We’ve inherited a seriously troubled economy when we took over-growth of 2.05 percent, serious rupee crisis, disproportionately skewed trade balance.”

As the country entered the third phase of the Plan, he said the government had met most of the INR debt obligations and that the restrictions had been lifted which awakened some sectors like construction.

“The Economic Stimulus Plan is beginning to take shape and over a thousand small and medium enterprises (SMEs) might bear fruits,” he said.

He said that all hydropower activities were now in full swing.

But to boost growth, local economists say that a sizeable investment and energetic economic activities must occur and that SME’s like poultry and livestock are peanuts to have any impact on GDP.

In fact, in Bhutan’s context the only investment of huge scale is in terms of hydropower.  Data from past reveals that, when Chukha hydropower’s main civil and electro-mechanical works of the project started in 1979, Bhutan recorded a growth of 13.9 percent.

After the three turbine units were commissioned between 1986 and 1988, the economic growth peaked at 28 percent in 1987.  But the growth had again stabilised more or less after its operation.

Similarly when Tala was fully commissioned in 2007, GDP grew by 17.9 percent from 6.8 percent in 2006.

While the government seems hopeful that such huge jump may happen again when either one of the three hydropower projects gets operational, economists are of the view that investment in hydropower has already peaked when two Punatshangchus were initiated in 2008.

This resulted in a growth of 11.7 percent in 2010, an all time high since 2008.

By Tshering Dorji

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