Currently, the country’s economy is not doing well, as we are saddled by high inflation, high cost of living, decrease in the purchasing power, attrition, businesses drying up, and less consumer spending. This leads to the question, are we going through an undeclared recession?
A recession, in simpler terms, is when the economy’s performance declines over an extended period of time, and is characterized by a contraction of GDP, an increase in the unemployment rate, and a fall in consumer expenditure.
The unemployment rate also increases as companies often reduce staff to save money. Currently, the unemployment rate stands at 5.9 percent, according to National Statistics Bureau (NSB). There are also cases in hotel sector and private sector where employees have been cut off due to lack of income generation.
As Bhutan is import dependent, there are not many manufacturing activities in the country, however, the service sector has been in a constant decline and businesses have not been selling well.
During recession, people have less money to spend so consumer spending decreases, which impact the retail sales. The retail sales in the country have been impacted a lot with retailers complaining of decrease in the number of consumers by 90 percent, which in turn decreases profit margin.
Talking with retailers, they state there has been a decrease in sales and consumer spending. Businesses from bars to nightclubs and even restaurants feel that their sales are not picking up.
The number of customers is still dropping, and according to Chimi from C-Mart, this has been happening since September last year.
The lack in the number of tourists has definitely impacted the businesses with handicraft shops complaining of no customers, and being unable earn well.
However, according to an economist, Sanjeev Mehta, we are not in a recession. “Technically speaking, it is not a recession, but definitely the economy has slowed down since 2011 and the pandemic has only added to the existing growth trouble. The economy’s yet to reach pre-pandemic level of real GDP. Higher unemployment and inflation, slower growth in aggregate demand, and reduced investment all have impacted the economic growth,” Sanjeev Mehta said.
He also pointed out that manufacturing, construction, tourism, agriculture and financial services have experienced steep slowdown in the previous decade (2010s).
“Slowing down of the growth is more of a structural issue than a short-term cyclical issue. The current financial crisis in USA and Europe will further add to the slowdown,” he added.
Talking with the President of the Bhutan Chamber for Commerce & Industry (BCCI), Tandy Wangchuk, said it is not recession, but rather the economy not doing well. “It is true that spending and income generation have all become less, and we are all aware of many young Bhutanese leaving to abroad for greener pastures. We are of less population, and generally for economic growth, we need population, and Bhutanese leaving for Australia has impacted the economy a lot.”
Tandy shared that despite these variables, there are still ways to improve the current economic conditions. “For economic recovery, several strategies can be considered. Firstly, diversifying our economy. Bhutan’s economy is heavily reliant on hydropower sector, which contributes significantly to the country’s GDP. However, diversification can reduce the country’s dependence on a single sector and minimise the risks of economy shock. Bhutan can explore other sectors like agriculture, tourism, and manufacturing.”
He pointed out that encouraging entrepreneurship can create new jobs, encourage competitiveness and contribute to economic growth entrepreneurship and the government can support entrepreneurs by offering funding, training and mentoring programme.
He further said, “Investing in human capital, as Bhutan has a young population and investing in health and education can have long term benefit for the economy. Educated and healthy citizens can contribute more to our workforce and be more productive.”
He said improving infrastructure can facilitate the economic growth by reducing transportation cost, increased access to market and improving connectivity. Bhutan can also invest in improving its own road, network, airport and digital infrastructure to facilitate economic activity
In addition to promoting tourism, Bhutan can also promote foreign investments.
He said, “Promoting foreign investment can bring in new technology, capital and experts. Bhutan can attract foreign investments by offering tax incentive, streamline regulation and stable political government.”
BCCI President said Bhutan is strategically located between India and China. Strengthening regional integration can increase trade, investment and tourism. Bhutan can work towards enhancing regional activities removing trade barriers and promote regional cooperation.
Although, technically not a recession, the country’s economic status is not looking well, and as we face high attrition, the next thing we might face might be human capital flight and financial crisis.