The amount of goods and services consumed by households in the country, also known as total consumption, is estimated to double in the current financial year. According to the finance ministry’s Macroeconomic Situation Report, total consumption is the key driver of the economy, accounting for more than 70 per cent of the country’s GDP.
The total consumption is estimated to grow by over six per cent in the 2023-2024 financial year, compared to a little over three per cent in the previous financial year.
The Macroeconomic Situation Report attributes the growth to an increase in household income and government consumption expenditure.
On the other hand, aggregate domestic demand growth is expected to slow down to 2.5 per cent in 2023 from over 12 per cent in the previous year due to a decline in public investment.
The aggregate domestic demand growth represents the total demand for goods and services driven by consumption, investment, government spending, and net exports.
Meanwhile, as the economy normalises from the impacts of the COVID-19 pandemic, private investments by businesses and individuals in capital goods and assets are estimated to grow at 2.5 per cent in the current financial year, slightly higher than the previous year.
Private investments typically include investments in machinery, equipment, buildings, and other productive assets.
On the contrary, public investment, which encompasses government spending on infrastructure such as roads, bridges, facilities, and other projects intended to benefit the public and promote economic development, is expected to shrink by a significant 17.1 per cent during the same period.
Public investment constitutes 12 per cent of the overall GDP. Lower government investment expenditure is blamed for the slower growth.
On the other hand, the report projects households, and individuals to spend more on goods and services for personal use and enjoyment during the current financial year. Private consumption growth is projected to reach seven per cent.
Public consumption in 2023, on the other hand, is estimated to grow at 4.4 per cent in the 2023-2024 financial year.
Public consumption is distinct from public investment. Public consumption represents the day-to-day operational expenses of government agencies.
On the other hand, public investment involves spending on long-term assets like infrastructure projects or capital goods.
Samten Dolkar
Edited by Sherub Dorji
