Australia rush, inflation and weak purchasing power impacts businesses

In the month of January 2023 figures from Australia’s Home Affairs Department shows that exactly 2,000 Bhutanese got education visas.

Prior to that in six months from 1 July to 31st December 2022, 6,497 Bhutanese got education visas.

This means that a total of 8,497 Bhutanese got education visas in the last seven months.

In the financial year July 2021 to June 2022, 2,583 Bhutanese got education visas.

So in the last 19 months itself Bhutan lost around 11,080 mainly young Bhutanese to Australia.

For a country with a population of around 763,250 (NSB estimate for 2022) this is a big chunk of Bhutan’s population and has been having a big impact on the sales of shops, restaurants, bars and other business outlets, especially in Thimphu.

Bhutan has lost young graduates, civil servants and young people from the private sector.

These are not only the work force of the country, but also among the highest spending customers who buy clothes, eat out, party out in bars, move around in taxis etc.

The majority of this 11,080 would be from Thimphu and so Thimphu’s many business outlets are feeling the drop in customers’ footfall.

This is keeping in mind that large numbers of youth are also heading to the Middle East and other countries and if they are added up then the total numbers of youth heading out would be much larger.

Initially, even though many shops complained of lesser customers it was assumed that customers had gone less due to the cold winter in Thimphu and people going to pilgrimage, holidays or back home, but now with the schools open, warmer weather and everyone back in Thimphu the lack of customers are still felt.

The hardest hit business outlets are the ones mainly used by these young customers which are clothes shops, restaurants, bars and discos etc.

Added to this is the fact that the country’s economy is currently on a recovery mode after the pandemic and people still do not have the buying power they once had. The economy is not in a great shape and this is impacting the buying power of people as they do not have money at hand.

A third factor really limiting shopping is the high inflation rate in the economy which is comparatively much higher than before the pandemic. Here the pandemic, supply chain issues, fuel prices and the Ukraine war are to blame.

Kinley Wangmo from the popular Garden of Sales, shared there are hardly any customers.

“There has been about 90% drop in the number of customers and with the drop in customers, there’s also 90% drop in profit. Before, we used to stock our products once a month during the winter season, however, currently, we didn’t find the need to stock our products even once.”

An employee at Garden of Sales said that the large numbers of youth heading out is having an impact.

The same can be said about other retailers. Chimi from C-Mart shares that her customers have been continuously dropping. “The number of customers keep on dropping, there is a 90% drop in the number of customers currently.”

When asked for the reason for such huge drop, she speculates the high number of people leaving the country and inflation.

Black out, a rooftop bar in Thimphu, which is quite popular among the locals have also been facing the same problem. Gyeltshen shared that he has lost his regular customers, about 300-400 to Australia and there is about 60% drop in customers.

“There’s a change in the pattern of spending now, people don’t spend as much as they used to. Currently, with many rules and restrictions on operating a bar, we are facing huge troubles in terms of making profit,” he added.

Similarly, Viva City, a popular night club among people shared that people’s purchasing power has decreased. “As cost has become very high, people are not spending lavishly like before. The spending has decreased a lot.”

Taxi drivers have also noted a drop in the numbers of young customers, including at night.

One argument against the people leaving and impacting business is that parking is still difficult to get. While this is true, the cars are driven by mainly middle aged and older generation people and they do not shop as much or eat out as much as the younger generation.

Currently the inflation rate is 4.33%. Month on month CPI in January is 0.56% which is an increase from November.

From the twelve key divisions, transportation was the largest driver, increasing by 12.36 percent and accounting for 43 percent of overall inflation. Clothes and footwear were second, increasing by 7.39 percent and accounting for 16 percent of overall inflation.

 Food and non-alcoholic beverages saw an increase of 1.28 percent, adding 14% to overall inflation.

Due to price rises in the economy, the Purchasing Power of Ngultrum as calculated by the CPI decreased by 4.15 percent between January 2022 and January 2023.

When compared to December 2012, the Ngultrum’s purchasing power as determined by the CPI is Nu. 59 in January 2023. As a result, Nu. 100 in January 2023 will only be worth Nu. 59 at rates from December 2012.

With limited scope of income generation and very less wages, the increase in the cost of living has decreased people’s purchasing power and limited spending.

Currently, the unemployment rate is at 5.9% and with high attrition from the country and the young workforce leaving for better opportunities, it seems like this unhealthy trend will continue for now.

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