Male Iron Rat Year
The Rat dug a huge hole in the economy last year that it had to force the government to reprioritise and rationalise planned budget activities.
The country recorded its first Covid-19 case on March 5, after which the government imposed measures to control the spread of the virus. That affected economic activities. Gross Domestic Product (GDP) in 2020 was projected to grow at 6.5 before the pandemic.
After the impact of the pandemic arrived in Bhutan, the government estimated the GDP growth at 1 percent. After the first lockdown, the GDP growth rate was revised to negative 2.1.
The GDP contraction resulted in the loss of jobs, decrease in people’s income levels and consumption capacity. According to the government’s estimates, about 50,000 Bhutanese lost their jobs, most of them in the tourism and the allied sectors.
The impact of Covid-19 pandemic would have been even worse. People whose incomes were affected received the Druk Gyalpo’s Relief Kidu in the form of interest waivers and monthly payments for those who lost their incomes.
The economy suffered further setbacks as the country went into the second lockdown on December 20 last year.
The government said that its 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. But despite that, GDP growth projection was revised further downward to negative 6.8 percent.
It was natural for the economic growth to be downgraded as most activities were affected. Some activities including the export of oranges and boulders, however, continued amid the lockdown.
Biggest export item sail through unaffected
The only Covid-19-proof economic bedrock was the hydropower sector.
Hydropower saw significant growth with energy generation increasing by 31.45 percent in 2020. Total generation from the six hydropower plants in operation increased to 11,364 million units (MU) in 2020 from 8,645 MU in the previous year, according to the Druk Green Power Corporation.
The increase in the generation was attributed to better rainfalls and the commissioning of the Mangdechhu project.
Tourism was the hardest hit sector. In the first quarter of last year, tourism generated a gross receipt of only USD 10.14 million (M), according to TCB. The country did not receive tourists in the remaining three quarters.
Had it not been for the pandemic, gross receipt from international arrivals was estimated to hit almost USD 92M in 2020. This means that with the closure of tourism, the loss to the government coffer was about USD 82M in 2020.
The domestic revenue for the past year is estimated at Nu 33,189M, which is the lowest in the recorded history of the Bhutanese economy. This was a 14 percent decrease from the previous year.
The Covid-19 pandemic gave the agriculture sector a renewed energy to achieve self-sufficiency and import substitution goals through increased production.
The agriculture ministry saw there were more than 66,000 acres of fallow land that could be cultivated to meet the domestic demand for vegetables. Revitalising the rural economy to create jobs was also emphasised.
However, a closer look at the budget allocation to various sectors for fiscal year (FY) 2020-21 showed that there is no significant shift in government policies or priorities. That was evident as not much changed in the percentage of the budget allocation for various sectors.