In what could be the worst economic growth recorded, the average Gross Domestic Product (GDP) growth in the past three years was just 0.8 percent, according to the finance ministry.
Presenting the 12th Plan midterm review report in Thimphu yesterday, Finance Secretary Nim Dorji said the GDP growth was calculated based on fiscal years and that the growth could be even lower (0.7 percent) if calculations were based on the calendar years.
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.
The 12th Plan average growth target was 5.7 percent.
The finance secretary said that the GDP growth was affected mainly due to the Covid-19 pandemic, which pushed the 2020 growth to negative 6 percent. The downward projection was made following the second nationwide lockdown in December last year.
The 23-day second nationwide lockdown, which began on December 23 last year, severely impacted the economy.
The contributions of major sectors, agriculture, industries and services, were 16 percent, 42 percent and 37 percent, respectively.
The growth, he said, was enabled by fiscal and monetary measures adopted by the government.
He said that the ratio of capital budget was increased and taxes exempted, among other measures.
“The main driver of the growth is the government spending (capital expenditure),” the finance secretary said. “But the capital budget utilisation rate is still low and the ministry is hoping to achieve an 80 percent budget utilisation rate.”
The actual capital expenditure reported in the first half of the fiscal year (July-December 2020) was Nu 6.176 billion (B), which is roughly 16 percent of total capital budget. This means that about 84 percent of the capital budget remained unused at the beginning of the second half if the fiscal year.
The expenditure in the second quarter was higher than the first quarter mainly because the implementation of the activities usually picks up from the second quarter onward. The capital budget utilisation in the first quarter of the fiscal year was 6 percent.
Nim Dorji said that enhanced access to capital kept the private ticking during the Covid-19 pandemic. The hydropower revenue grew by more than 30 percent, according to him.
He said that the growth was also enabled by the Foreign Direct Investment (FDI), Nu 12B worth of which was received in the first half of the Plan period.
The government approved 10 FDI projects amidst the Covid-19 pandemic last year, according to the economic affairs ministry.
Although the number of approved projects declined by two from 2019, the value of the projects last year increased by 80 percent to Nu 2.104B from Nu 1.166B.
One of the indicators of an accelerated growth, Nima Dorji said, was to diversify the economy and increase the non-hydro revenue. “In the past, it was said that all the eggs were put in one basket (hydropower-driven investments).”
The total revenue from non-hydro sectors in the fiscal year 2019-20 was Nu 36B, of which Nu 24B (66 percent) was non-hydro revenue.
The non-hydro revenue in 2020-21 fell to 17B, a 50 percent decline from the previous fiscal year.