Globally, the world’s biggest economies are already showing signs of recession.According to International Monetary Fund, the global economy’s growth is forecast to slow from 3.2 % in 2022 to 2.7% in 2023.
Bhutan’s economy declined due to the pandemic with service sectors especially the tourism sector being highly affected. The sharp fall in tourism related activities had a direct impact on livelihood, earnings and employment.
On the macroeconomic level, war in Ukraine has resulted in higher global energy and commodity prices which impacts the balance of payment with the already sharp decline in foreign reserves, the US dollars and Indian INR.
With the economy in recovery mode, economic activities should not decrease yet young people, considered the country’s workforce, are leaving the country in search of better opportunities to countries such as Australia and Canada.
Private sector development is stunted with the non-performing loans (NPL) issues and the cooling period of 6 months, and loan moratoriums. The graduation from Least Developed Country to Developing Country is also in the midst to be re-evaluated. Soaring inflation and the rising cost of living has people already facing financial constraints and everything showcases the sign that the economy is not doing well.
His Majesty’s address on the National Day also had a subject focus on economic crisis. “All the signs point to a looming global economic crisis: soaring inflation around the world, the strengthening of US dollars, the US government’s plans to increase the interest rates, the war between Russia and Ukraine that continues to drag on. We must be prepared for the global economic crisis that will certainly have an impact on Bhutan,” said His Majesty.
Bhutan is heavily import depended and with debates going around globally on economic recession, whether the recession hits or not, it can be said that whatever economic crisis may come, Bhutan will surely be impacted.
Predictions from Asian Development Bank forecasts a decline in the GDP growth from 4.5% in 2022 to 4.0% in 2023 for Bhutan.
Talking to the President of Bhutan Chamber for Commerce and Industry, Mr. Tandy Wangchuk, he shares that the economy will take a turn for the worse in 2023 if the conditions stay the same. “The crisis of the last two years has left the country saddled with higher debt and higher inequality. Economy is grappling with high inflation and lower growth. The government should work hand in hand with the royal monetary authority (RMA) for effective coordination and delivery of services, and relax the guidelines according to the country’s economy.”
According to the president, the bottlenecks of NPL, the cooling period and the sustainable development fee (SDF) are impacting the private sector even in terms of job creation.