Bhutan’s economic growth (GDP) is expected to recover moderately to 3.7 percent in the fiscal year (FY) 2021-22 with policy responses to the Covid-19 pandemic, including the vaccination drive, according to the Asian Development Outlook (ADO) 2021.
The resident mission of Asian Development Bank (ADB) in Thimphu, which shared the report at a press conference on April 29, stated that the rebound in the economy would be enabled by the government’s accelerated implementation of planned capital activities.
Another hope for the revival of the economy is that consumption, which shrunk in FY 2021, is expected to rebound in FY 2022. The growth in consumption is expected to be enabled by the government’s increased spending and an enhanced domestic revenue mobilisation through the introduction of a goods and services tax (GST).
The ADB’s officer-in-charge for Bhutan, Atsushi Kaneko, said: “Economic recovery will be backed by swift and strong policy response by the government, including the nationwide vaccination drive that started on March 27, 2021, restoring mobility and economic activity; strong government investment spending; and global economic recovery, reviving tourism albeit moderately.”
The Delhi-based regional economic advisor of ADB, Lei Lei Song, said that there were chances of the Covid-19 spreading to south Asian countries.
He said that the key to fighting the pandemic was vaccination. “But we have to be vigilant even as the vaccination is taking place,” he added.
ADB’s economics officer in Thimphu, Tshering Lhamo, said that the government’s efforts under the benevolent leadership of His Majesty The King had prevented a full-blown Covid-19 outbreak in the country. But she added that the possibilities of further lockdowns still posed threats to economic revival.
In FY 2022, the ADB forecasts the government’s investment will boost imports. It also forecasts that the domestic revenue performance will improve in FY 2022 as tourism is expected to be revived to some extent and on implementation of a goods and services tax.
However, inflation is expected to rise from 3.0 percent in FY 2019-20 to 6.4 percent in FY 2020-21 due to supply chain disruption and panic buying. However, inflation is forecast to ease to 5.3 percent in FY 2021-22 as prices are expected to trend lower in India and domestic conditions improve.
ADB stated that it has committed USD 584.06 million (M). In 2020, ADB responded to assist with the government’s most urgent pandemic needs and provided USD 108.9M as loans and grants.
ADB’s overall assistance aims to help promote reforms, support inclusive growth, enhance domestic resource mobilisation, and environmental sustainability.
Economic growth is estimated to shrink by 3.4 percent in FY 2020-21. The GDP growth is estimated at 0.9 percent in FY 2019-20.
A shrink of GDP results in loss of jobs, decrease in people’s income levels and consumption capacity. It also means lower profits for companies, including government corporations.
Finance Minister Namgay Tshering at the virtual meet the press yesterday said: “The ADB’s forecasts are based on regional growth forecasts as the Bhutanese economy was trade-based driven by exports and imports,” he said.
He said that the government was hoping for a V-shaped economic recovery despite the second wave of Covid-19 in India.