Increased imports against a marginal increase in exports could see the trade deficit widen to 12.5 percent of gross domestic product (GDP) this fiscal year (FY) 2021-22, according to the Royal Monetary Authority’s annual report, 2021.
The projection was based on the macro-economic framework of the finance ministry as of October last year.
The trade deficit is estimated to improve from FY 2022-23 onwards with hydropower export expected to grow by 27.4 percent with the commissioning of two new hydropower projects – Punatshangchhu-II and Nikachhu hydroelectric projects in 2023, as per the report.
Similarly, import is expected to grow by 17.7 percent (Nu 77.34B) in FY 2021-22, witnessing a decreasing trend from FY 2022-23 onwards in the medium term.
The country in the FY 2020-21 exported goods (provisional) worth Nu 53.1 billion (B) and imported Nu 65.53B worth of goods, which means that the country’s import value exceeded the value of its exports.
When a country’s import value is greater than its export, the country experiences a trade deficit.
The deficit was recorded at Nu 12.43B (7.2 percent of GDP) in FY 2020-21 which saw a fall from Nu 22. 73B (12.7 of GDP) in the FY 2019-2020.
Electricity export played a vital role in narrowing the trade deficit. Electricity exports increased by 15.8 percent which constituted almost half of the total merchandise exports in FY 2020-21 with the full commissioning of Mangdechhu hydropower project at the end of 2019.
However, import of merchandise saw a drop of 5.6 percent due to the Covid-19 containment measures and others while non-electricity export rebounded by 12.7 percent in FY 2020-21.
In 2020, the drop in non-electricity exports was caused by a deterioration in minerals, industrial products, and agriculture products exports.
India continues to be the major trading partner for Bhutan which accounts for over 75 percent of the total import.
Bhutan imported Nu 51.38B worth of goods from India which is a fall from Nu 56.66B in 2020, according to Bhutan Trade Statistics.
The top imported goods were mineral products including oil and fuel worth Nu 10.8B from India. The country also imported more than 9B worth of products derived from animals and vegetables.
The country has also imported vehicles and accessories worth more than 9B, of which Nu 3.1B was from India. Goods worth Nu 15.26B were imported from countries other than India.
Bhutan exported Nu 43.51B worth of goods to India with electricity export accounting for Nu 27.52B. Bhutan’s top export was silicon products valued at Nu 9.6B followed by other mineral-based products.
India, France, China, Thailand, and Singapore were the top import destinations in 2020.
Besides India, Bangladesh, Nepal, Italy, Vietnam, and Turkey were the top five export destinations.