The COVID-19 pandemic crippled the global economy. Bhutan is no exception. In July this year, the country’s projection of Gross Domestic Product for the fiscal year 2020-2021 was at negative 2.3. And now, the three-week lockdown has thrown the forecast into a deeper decline.
With economic activities almost coming to a standstill during the lockdown, the GDP projection for the current fiscal year dropped to negative 6.7. This means the country’s capacity to produce goods and services for the recorded year is reduced further.
According to Finance Minister Namgay Tshering, the government is sceptical of achieving the estimated revenue of Nu 33bn in the fiscal year 2020-2021. Currently, the domestic revenue is largely from hydropower followed by tourism and taxes.
“We are lucky that hydropower is COVID-19-proof economic bedrock that we have at this point in time. And unfortunately, we have literally zero return from the tourism sector. Similarly, with lots of social imposition and social restrictions, businesses couldn’t take up as usual; so that has a direct and indirect bearing on the Tax Revenue,” Lyonpo said.
Against the backdrop of reduced GDP forecast, the government will now initiate a major overhaul of the 12th Five Year Plan and consider drastic shifts in priorities of the developmental plan. A capital of Nu 310bn is approved for the current Plan.
“The priority that we have set pre-COVID crisis is different from the priorities we feel that is important during the post COVID era. For this purpose, our economic recovery plans also need to be adjusted to the tune of the changing dynamics of the challenges imposed by the COVID-19,” Lyonpo added.
Governments usually forecast GDP growth for a period in time by considering indicators such as inflation, interest rates, industrial production and consumer confidence among others.
Namgay Wangchuk
