Are we heading towards an economic recession?

With the high inflationary pressures and the global economies, like America and China facing a slowdown, the question that many are asking is whether Bhutan is also heading for an economic recession?

Bhutan’s situation

Bhutan’s GDP growth rate is at 4.09 percent, and the inflation rate is at 4 percent according to the National Statistics Bureau (NSB), with the unemployment rate at 5.9 percent.

Typically, during a recession, the GDP growth rate falls, and retail sales fall as people have less money to spend. Due to pullbacks in economic activity, the economy shrinks, especially consumer spending and business investment.

As the private sector is the backbone of the economy, the country’s private sector has been in a slump. With less consumer spending, and a population that has been leaving, Bhutan’s road is full of uncertainties down the line.

Bhutan’s situation is more complex as Bhutan’s economy follows similar trends to India’s economy, and as an import-dependent country, although a recession might not happen in Bhutan, the economy will be badly impacted.

According to a local economist, Professor Sanjeev Mehta, despite decent growth, the USA is at risk of recession due to persisting high inflation and expected stronger measures for quantitative controls by the Fed. “It is all speculative at this juncture that how deep would be the recession and how long it would last. Aggravated by the Chinese slowdown, the world economy is likely to face hard times. Bhutan is largely immune to global shocks, but more vulnerable to what happens in India. Since India is expected to grow faster, Bhutan may not be affected by the possible global slowdown. The only possible source of transmission is the volume of tourists from the west.”

The BCCI President Tandy Wangchuk said, “Yes, we are heading into a recession and even the statistics seems to be showing that.”

He said that sales for shops and outlets have gone down by as much as 70 percent due to lack of population with the exodus abroad. He said for an economy needs a population to thrive and currently politicians are not coming up with strategic interventions like bonuses for births.

Tandy said a lot of people heading abroad will opt to stay there and apply for Permanent Residency and Green Cards and even those coming back may do so only after 10 to 15 years.

The President said that global pandemic badly impacted the economy but ease of doing business is still an issue. He said that access to credit is an issue as banks are not being allowed to revalue the loans on the collateral given five years ago.

He said there are major coordination issues too. “Under the EDP Charcoal production is there but while one ministry gives you a license for it the Forest will not give permission. Food security is a national policy but again there is conflict with Forest and we end up importing 150,000 tons of food grains in a year.”

He said that there are issues in captive mines with dolomite prices for locals.

On the boulder export front, he said the Suvidha App issue is still not resolved and this is sucking the profitability out of the industry.

In tourism he said it will be difficult right now and currently tour operators in Jaigaon are dictating the hotel rates in Thimphu who are giving it at depressed prices. However, the INR is kept in Jaigaon and only the Ngultrum is sent up.

According to the Opposition Leader, Dorji Wangdi, Bhutan’s economy is more complex. “We are not the only country facing the economic crisis at this point in juncture. At this moment, we really can’t say it is a recession but it is an economic downturn. The cost of living has increased, globally, and on the other hand, the income has decreased. Bhutan’s case is more complex because we essentially import inflation, as we are import-dependent. In our case, it’s the public sector that injects money into the economy, and our economy is public sector-driven.”

“Our purchasing power has decreased, and the government has put in austerity measures as we don’t have the money, so the spending has gone down. When public spending goes down, purchasing power decreases which impacts the overall economy. Our case gets more complex with the exodus of people leaving which has decreased our customer base,” he added.

He further pointed out that the economy and demography go together. “In the economy, the most important factor is the aggregate demand, so when you lose population, it affects demand and consumption. People leaving has different layers of implications, and the first layer is losing the market base. Our fertility rate has been going down, and at least 80 percent of those who left are of reproductive age. We are going to face serious demographic challenges, not just losing market base and demand potential.”

Although the country is not in recession, the economy has been stagnant for a while. Professor Mehta shared that a negative growth rate in two or more than two quarters is a symptom of recession, and it can also be indicated by rising unemployment, failing businesses, falling real estate prices, and low aggregate demand.


Talks of recession are happening globally with statistics and projections from economists, and worsened by news of stock market crashes. A survey done in the US shares that most of the private sector business people believe that they are already in recession.

The economic growth is slow for the world’s biggest economy, and the second biggest economy, China, is also facing troubles with its economy. China’s post-pandemic economic recovery is slowing, according to Euromonitor following the declining demand for the country’s exports and sluggish growth of domestic consumption. Ongoing real estate market problems spark concerns over the stability of China’s financial system, risking a deeper downturn for the Chinese economy.

Weakening growth and rising risks in the world’s second-largest economy can have significant impacts on the global economy, with important implications for global businesses and consumers.

According to Forbes Advisor, the New York Fed recession probability indicator shows there is still a 66 percent chance of a US recession in the next 12 months.

The economic powerhouse of Europe, Germany, has had three quarters of declared recession while New Zealand has also declared that they are in recession and UK has given a recession alert.

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