GDP slumps to negative 6.7 in August
As feared, the economy is at its worse and the Gross Domestic Product (GDP), the conventional yardstick to measure growth, slumped to its lowest in August registering a growth of negative 6.7 percent.
“The economy is really bad. It is worrying,” said a worried finance minister, Namgay Tshering who is in Paro to facilitate and coordinate the functioning of the dzongkhag Covid-19 taskforce with that of the national task force. “The country is already into a recession.”
In the beginning of the current fiscal year, the government projected a GDP of negative 2.3 percent. However, with the nationwide lockdown starting August 11 bringing every business and economic activity to a standstill, the GDP was – 6.7 percent.
People could not do business due to the restrictions imposed to break the transmission chain, lyonpo Namgay Tshering said. “The second wave of the pandemic is on the economy.”
While the government is applauded for its Covid-19 containment measures, there is a lot of criticisms on its handling of the economy.
Lyonpo Namgay Tshering said that the government’s focus was on balancing Covid-19 containment measures and revamping the economy.
However, against the backdrop of the recession, the government plans to initiate a major overhaul of the 12th Plan with drastic shifts in priorities of the developmental activities. “I think it is high time the government bring forward the midterm review to plan a way forward,” said Lyonpo.
Kuensel learnt that the government has asked all the ministries to start readjusting and appropriating budget for the rest of the Plan period. The Gross National Happiness Commission secretariat had been tasked to adjust budget wherever possible.
Meanwhile, the priority of the economic recovery plan will be to boost export and substitute import. Lyonpo said the government should, for instance, intensify export of boulder and explore additional mines and minerals to earn additional revenue. “Government is open to amend Acts and policies to encourage innovative activities to revamp the economy.”
The government has allocated 31 percent on capital expenditure from the 12th Plan budget outlay. The significant jump in allocation, according to lyonpo, was essential to offset the losses. For the last five months alone, the country inflicted economic lost about Nu 5 Billion .
As the government’s spending alone contributes 32 percent to the GDP, Lyonpo said that the government must spend the amount otherwise the impact would be significant. In an economic downturn, he said that the governments should pump in money to boost consumption capacity, and purchasing power of the individual to initiate money flow in the economy.
The government allocated Nu 73B for the current fiscal year. Of the total, Nu 36.2B is allocated for capital expenditure and the remaining for recurrent expenditure.
The domestic revenue is bleak without economic activities in the country. Contribution to the domestic revenue is mainly from hydropower, tourism, and tax revenue. While there is zero revenue from the tourism industry, tax revenue has decreased by 70 percent, according to the minister. “We are betting on hydropower now.”
Export of hydropower is not affected while the country experienced a favourable hydrology this year, so far.
Recurrent expenditure, as per the Constitution, has to be met from domestic revenue, which in comparison to last year, has reduced by 15 per cent. “We have to adjust from within the envelope,” said the minister.
The government is identifying alternative productive sectors which could contribute to the country’s GDP in short to medium term.
Lyonpo said that the government would facilitate private sector development by improving access to finance and amending policies. He added that the financial institution should work closely with the government to ensure impactful investment in productive sectors at a favourable lending term.