The -6.7 percent reported earlier is the worst-case scenario projection, says FM

MB Subba

The Gross Domestic Product (GDP) growth projection for 2020 has been revised downward to negative 2.1 after the country went into its first ever lockdown in August.

Finance Minister Namgay Tshering clarified that the negative growth of 6.7 percent reported earlier in the media was the projection for the worst-case scenario, which he said would not come.

He said that the worst-case scenario would come only if the country goes into several phases of lockdowns in the future.

A contraction 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, which in turn means lower stock prices for some of them.

However, the finance minister said that the impact of lockdown was not felt as badly as it could have been, thanks to the Druk Gyalpo’s Relief Kidu in the form of interest waivers and monthly payment for those who lost their incomes.

When the government presented the annual budget 2020-21 in Parliament, the GDP projection for the year was 1 percent.

According to the finance minister, the GDP would not have contracted had the lockdown not come. “We have analysed the data and the forecast is that the GDP has gone down by negative 2.1 percent for 2020,” he said.

The lockdown lasted for 21 days. But the finance minister stated that it could be said that the lockdown lasted for a month as it was lifted in phases.

“We have to make strategies to co-exist with the Covid-19. We cannot keep imposing all the restrictions as the health of the economy is equally important,” he said.

Lyonpo Namgay Tshering expressed his hope that the GDP would not plunge below -2.1 percent, saying that the government would walk on a middle path between the Covid-19 and the economy.

“The worst-case scenario will never happen as the government will implement smart lockdowns if need be. But there is no harm in being prepared for the worst case scenario,” he said.   

Smart lockdowns would mean lockdown restrictions only in specific affected areas and not the whole country or the dzongkhag.

The government’s projection (negative 2.1 percent) puts Bhutan in a much better place than most economies in the world.

Globally, the finance minister said that the GDP had plunged to negative 4.5 percent on an average as of June 2020. “We are doing fairly well because we did not have local transmission till August,” he said.

The only Covid-19-proof economic bedrock was the hydropower sector, from which revenue has increased. It has generally been a good year for the country’s hydropower sector as the rain arrived as early as late May, according to the Druk Green Power Corporation Limited (DGPC).

The overall generation of the DGPC power plants—Tala, Chhukha, Basochhu and Kurichhu—has increased to 3,724 million units (MU) from January to July 31 this year as compared to 3,248 MU in the same period last year. This is a 14 percent increase.

The finance minister said that the growth in the hydropower sector to a certain extent would offset the losses in other sectors.

The Mangdechhu hydropower plant, he said, generated 20 percent above its normal capacity for a month due to timely rain. “This means that we have somewhere, something to rely on,” he said.