… MoF forecasts GDP growth of 3.3 percent in the next fiscal year

MB Subba 

The Gross Domestic Product (GDP) growth projection for 2020 has been revised further downward to negative 6.8 percent following the second nationwide lockdown.

The finance ministry communicated the projection figure to budgetary agencies in its budget call notification for the fiscal year 2021-22 issued on January 18. The ministry annually reviews the economic performance and comes up with growth estimates before issuing the budget call notification.

The 23-day second nationwide lockdown, which began on December 23 last year, severely impacted the economy besides overwhelming the public healthcare system.

A contraction of GDP means loss of jobs, a decrease in people’s income levels and consumption capacity. It also results in lower profits for companies, including government corporations, which in turn means lower stock prices for some of them.

However, the finance ministry has forecast a positive economic trajectory for the fiscal year 2021-22 with a growth of 3.3 percent.

According to the ministry, the Cabinet recently endorsed a resource envelope of more than Nu 45.46 billion (B) for the fiscal year 2021-22 based on macroeconomic performance and outlook. This comprises the projected domestic revenue of Nu 34.641B and external grants of Nu 19.436B.

While the finance minister was not available for comments, Tengye Lyonpo (economic affairs minister) Loknath Sharma said that it was natural for the economic growth to be downgraded as most activities were affected during the lockdown. “Imports and exports couldn’t be carried out as usual and most shops had to be closed,” he said.

However, he added that the government’s preparedness with lessons from the first lockdown in terms of sustaining trade and imports, and facilitation of all exports had provided some cushion on the impact of the second lockdown. He said that activities including export of oranges continued amid the lockdown.

Since the detection of the first case, the government’s primary focus has always been on saving lives.

Lyonpo Loknath Sharma said that although the economy had suffered some loss, the strict protocol and the lockdown measures had prevented the virus from reaching villages and hydropower projects sites. “People and businesses have suffered, but if lives are protected then the livelihoods can pick up.”

He said he was hoping that businesses and other activities would pick up soon with the lifting of the lockdown. He said that he was hopeful that the economic growth could be slightly better than what has been projected.

Earlier, following the first lockdown in August 2020, the government had revised the GDP growth at negative 2.1 percent. The finance ministry after the detection of the country’s first Covid-19 in March last year but before the first lockdown, had projected the GDP at 1 percent.

In a recent virtual meeting with finance ministry officials, Prime Minister Dr Lotay Tshering said all the sectors that 2021 was crucial for economic recovery, and insisted on effective implementation of capital investments. He urged all sectors to revisit and prioritize activities that were new, innovative and effective to revive the economy.