Having achieved a GDP growth of 6.5 percent in 2015, economic forecasts for the coming years look promising.
Both trade and current account deficits are expected to improve. External grant and official inflows in the capital and financial account remain optimistic. The country’s overall balance of payments is projected to be positive with reserves growing at an average of 14.3 percent per annum.
While the figures show optimistic scenario of the economy, it could mislead us. Should we construe the numeric values and sit in our comfort zones, it could have impact on our economy.
The Royal Monetary Authority (RMA) has shared its concerns. The government must give a serious thought to it.
The fact is that our economy can no longer be sustained on the back of a single economic sector – hydropower – although it is a vital catalyst for socio-economic development.
RMA has said that our reserve buildup is still being driven by aid inflows and hydropower financing, seasonal and temporary in nature. There has also been a concomitant increase in external debt levels.
We have had seminars, conferences and answers. Sadly, we did not do much. The fact that same concerns are being raised by stakeholders every year tells us that very little had been done to address the issue.
If our reserves are built by loans and aids, when can we stand on our own feet? What if the energy market experiences a downfall and global economic downturn affects tourism?
Our growth is achieved from government spending, hydropower and tourism-related sectors. Construction sector has achieved growth of more than 11 percent but its dependence on government activities makes it vulnerable to shocks. As highlighted by the RMA, Bhutan continues to face numerous structural weaknesses and challenges that need close attention to ensure the long-term sustainability of the economy.
When Chhukha was fully commissioned, our GDP growth in 1987 shot to 28 percent. Similarly, when Tala was commissioned, GDP growth increased by 17 percent. This shows that achievements in social development have been made in recent years with hydropower revenue. What is important is that we must diversify our revenue base given the ever-increasing economic needs. Challenge remains for Bhutan to expand its economic base and make its growth more inclusive.
Our monetary and fiscal policies should not be aimed at making the government richer, pushing its citizens to depend on the government in the process.
Economic diversification is entrenched in the five jewels that the government has identified. However, we can see where the government gives priority. A major share of government investments is in the hydropower sector.
The government’s pledge to achieve an average growth of 10 percent in five years is not an impossible task if it is just the numbers that matter. For instance , if we commission just one hydropower projet, we would be able to double our growth.
It would mean nothing, however, if the double-digit growth does not help eradicate poverty, address income gap and improve living conditions, among others.