The Bhutanese Leading the way.
One of the main responsibilities of the Press is to warn the nation and society of any major impending crisis or disaster, before it happens.
This paper has been writing for a while about a perfect economic storm that is now within our horizon.
The storm is not an imaginary one, but visible in many ways. The most visible sign is in the banking system.
There is around Nu 8 billion (bn) in active Non Performing Loans (NPLs) and Nu 13 bn in charged-off loans or adjusted NPLs, totaling Nu 21 bn. In addition, deferred loans currently amount to Nu 34 bn, bringing the total to around Nu 55 bn.
Another sign is the falling sales of business outlets even in the commercially most active street of Norzin Lam. After the pandemic sales have dropped by around 50 percent.
Yet another sign is in the commercial real estate sector as an increasing number of commercial buildings even in prime areas of Thimphu have empty units. This would have been unthinkable before the pandemic.
Even for the units that are taken up the business is not even able to recover rent and they either struggle or close up and move away.
This phenomenon is not restricted to just Thimphu, but also in other towns across Bhutan.
Tourism numbers seem to be improving, but it is nowhere enough to increase the room rates or help hotels with paying their loans as the loan deferral comes to a close in June.
Another predictive sign is also the overall real estate sector where real estate companies or sellers have to keep advertising the same property several times to find a buyer. Real estate prices are not going up and in some places are even coming down.
Bhutan’s nascent stock market is also not doing well compared to past years as dividends from various companies that make it up continue to disappoint investors.
The large numbers of youth that have migrated abroad is well known and this has taken away a huge customer base for local businesses.
The main threat of the hour now is that if the NPL and loan deferral issues go out of control then there is a danger of a banking crisis.
Bhutan, at the most, has one year to get its economic act together, otherwise we will face the perfect economic storm.
During an economic crisis, what matters is that the government keeps its foot on the accelerator. –David Ignatius
