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Bhutan has a tough road post-Covid-19 economic recovery, as India is one of the hardest hit economies.
This is according to the chief of Global Economic Monitoring at the UN Department of Economic and Social Affairs (UN-DESA), Hamid Rashid, one of the panelists who spoke virtually from New York on ‘Future of Economy’, a conversation series
He said a V-shaped economic recovery for Bhutan was highly unlikely. The country, Hamid Rashid said, need not worry so much about European or the US GDP growth rates although they would matter in Bhutan’s tourism sector.
He said that Bhutan’s immediate risk was with neighbour India, whose GDP is forecasted to shrink by 4.5 percent, the largest contraction in its history.
“That is bad news for Bhutan,” he said, adding that the Bhutanese economy would face multiple shocks should India experience the estimated GDP contraction and the Indian economy continue to remain subdued in the near future.
Hamid Rashid said that the shocks would be in form of growth, fiscal assistance and investments. Export to India including electricity could suffer due to possible shortfall in demand.
The country receives fiscal support from India and a decrease in the flow of monetary support from India would hurt Bhutan’s recovery efforts. With the Indian economy shrinking, he said Bhutan was unlikely to expect a major investment boom in the coming years.
“That is something that would put Bhutan in a very tight spot. It would be probably walking on a thin ice,” he said, reasoning that its big debt burden does not enable the country to expand its fiscal space through borrowings.
Hamid Rashid that said the government must add more people in the economy and improve the productivity of the people. He said that Bhutan’s GDP per-capital quadrupled in the last 20 years but that did not come from productivity growth.
Bhutan’s growth in productivity, he said, was very slow. “The productivity growth was about 3 percent a year compared to the 7 percent average GDP growth in the last 20 years.”
And he added that consumption at the same time was about 45 percent of the GDP and that it was pretty low even by some LDC standard.
Given the economic prospects in India, Hamid Rashid said that Bhutan needed to be much more practical in looking forward that it could not expect to grow at 7 or 8 percent in the next 10 years.
Another panelist, Thinley Choden, said that the future of the economy was in entrepreneurship development. She highlighted the importance of access to capital.
Phub Dorji, a data enthusiast, said that the government must find a third major source of revenue besides hydropower and tourism to enjoy a boost in the economy.
CEO of Royal Securities Exchange of Bhutan, Dorji Phuntsho, said that the private sector was largely dominated by micro, small, and medium businesses.
He said that most of the large businesses were family owned. “Only big companies have the capacity to generate employment.”
Thinley Choden said: “We should have an environment where youths dreams to be an entrepreneur rather than civil servants.”