The Bhutanese Leading the way.
The National Statistics Bureau (NSB) has finally released the much delayed Gross Domestic Product (GDP) growth rate for 2018 and it shows that the economy had its second worst year ever on record with GDP touching 3.03 percent.
The last time Bhutan’s economy had such poor numbers was after the INR crisis in 2012-13 when GDP touched a record low of 2.12 percent in 2013.
The NSB report said that the main sectors that led to deceleration in economic growth were negative growth rates in Electricity (-14.89 percent), Construction (value added) (-7.99 percent), General Government (minus education and health) (-1.53 percent) and Forestry and Logging (-1.01 percent).
The Construction sector has a whole which includes total investment made shrunk by -10.37 percent.
Further, sluggish performance of manufacturing sector and private social and recreational sector also contributed to slowdown in economic growth in 2018.
Though small in size the import and consumption of valuable like gold and jewelry hit a negative of -49.25 percent in 2018.
From the report it is clear that the two biggest hits to the GDP came from electricity and construction given their large contribution or share of the GDP which is 14.20 percent and 11.27 percent respectively.
Even the negative growth in the general government (administration)would have had an impact since it makes up around 7.03 percent of the GDP while forestry makes up around 3 percent of the GDP.
In total the sectors that have slowed down make up around 35.50 percent of the GDP.
Manufacturing which grew by 6.46 percent in 2017 slowed down almost by half in 2018 to 3.70 percent. This sector makes up 7.53 percent of the GDP.
Private, social and recreational services which grew 20.47 percent in 2017 slowed down to just 0.01 percent. This sector while being an important indicator contributes only 0.41 percent of GDP.
The trade deficit in 2018 increased by 13.03 percent from the previous years.
A NSB official said that the GDP growth rate in 2019 should be slightly better than 2018 mainly on account of power production from the 720 MW Mangdechu project.
However, he said that even then it would be around four percent with room for correction.
The Gross National Income (GNI) recorded a growth of 2.67 percent in 2018, which is a decrease of 1.87 percentage points compared to 2017. The lower growth in GNI in 2018 was due to increase in the outflow of primary income.
The GDP per capita in 2018 increased to Nu 227,849.59 (US $ 3,331.13) from Nu 216,941.13 (US $ 3,332.56) in 2017 and in real terms, it grew by 3.19 percent, however, this was a drop of 0.18 percentage points from 3.38 percent in 2017.
Price change (inflation) measured by Consumer Price Index (CPI) was 2.72 percent in 2018, which was a drop of 2.24 percentage points from 4.96 percent in 2017.
The Gross National Savingsrecorded a growth of 0.85 percent in 2018 from the previous year. The consistent increase in final consumption expenditure of the households and the government, combined with poor net inflow of primary income from abroad led to the sluggish increase in national savings
Electricity and Water Supply
The electricity and water sector’s growth of -14.89 percent in 2018 from negative -3.81 percent in 2017 was due to a negative -10 percent drop in electricity production. Distribution of power witnessed one of the highest fall in growth by negative -30.14 percent as compared to 2017. The drop was mainly due to completion of secondary construction activities.
Construction
The construction sector noted negative growth of -7.99 percent in 2018 from a growth of 6.21 percent in 2017, this was fall by 14.20 percentage points from previous year.
The government construction accounted for 30.30 percent, while the private and public corporations’ construction together accounted for 69.70 percent of the sector’s GVA in 2018.
A NSB official said that the 2018 witnessed a transition in government and so that would have impacted apart from the lack of any new hydro mega project. Construction has still not picked up much in 2019 going by the woes of the construction sector.
Manufacturing
Among other sub-sectors that contributed negatively to growth during the year were wood-based industries and other manufacturing related industries with negative growth of -0.37 percentage in 2018.
Within the manufacturing sector, food and cement manufacturing industries which had a negative growth in 2017 were the main contributor to the growth in 2018. The food and cement manufacturing subsector grew at 16.76 and 9.27 percent respectively.
Mining and Quarrying
The growth for the Mining and quarrying sector increased to 37.56 percent in 2018 from 7.01 percent growth in 2017, up by 30.56 percentage points. Gypsum and Marble mines were the highest contributors to the growth for the sector, with an annual growth of 92.36 percent and 67.67 percent respectively in 2018.
The Mining and Quarrying sector recorded a share of 4.86 percent to GDP.
Agriculture
Crops recorded a growth of 4.94 percent in 2018 as compared to 6.30 percent in 2017, which is a drop by 1.35 percentage points from the previous year. The sector’s growth picked up starting 2015 after a long period of sluggish growth. The sustained higher growth for the past three years was a result of the increase in production of crops like potatoes, chillies, wheat and barley.
The sector recorded a value added of Nu. 14.101 bn in 2018 compared to Nu. 12.922 bn in 2017 and it accounts for 8.43 percent of GDP.
The improved breed of cattle population recorded a growth of 8.59 percent, up by 0.39 percentage points as against 8.20 percent growth in 2017. Among the livestock population, the population of pig recorded highest increase with the growth of 29.38 percent as against 22.78 percent in 2017. On the other hand, population of horses continued to decline by for the past three consecutive years.
The Gross Value Added (GVA) for the Livestock sector was estimated at Nu. 7. 463 bn in current prices. The growth of the sector accelerated to 6.92 percent, up by 2.51 percentage points from 2017. The share of livestock sector to the GDP was recorded at 4.46 percent.
Wholesale and Retail Trade
The wholesale and retail trade sector (trade and repair of motor vehicles, motorcycle, personal and household appliances) growth decelerated marginally from 10.41 percent in 2017 to 10.18 percent in 2018, down by 0.23 percentage points.
Within the sector, wholesale and retail trade sub-sector recorded a growth of 10.05 percent as compared to 7.99 percent in 2017, up by 2.06 percentage points. The subsector constituted about 97 percent of the total contribution.
The repair of motor vehicles, motorcycle, personal and household appliances subsector contributed only about 3 percent of the total contribution, and recorded growth of 8.60 percent as compared to 9.15 percent growth in 2017, down by 0.55 percentage points.
The sector represented 8.99 percent of the economy.
Hotels and Restaurants
The performance of the hotel and restaurant sector is mainly driven by the number of tourist arrivals in the country. In 2018, the number of international visitors’ arrival (dollar paying) in the country increased by 1.80 percent only, down by 12.29 percentage points from a growth of 14.05 percent in 2017. With minimal increase in the inflow of the tourists, the sector’s growth decelerated to 10.51 percent from 15.20 percent growth in 2017, down by 4.69 percentage points.
The share of GDP was 2.41 percent in 2018.
Transport, Storage and Communications
The transport, storage and communication recorded 10.90 percent growth in 2018 from 13.34 percent in 2017, down by 2.44 percentage points.
Major contribution to growth was from land transport with a growth of 20.51 percent and communication with a growth of 12.57 percent in 2018.
The transport, storage and communication sector accounts for 9.99 percent of the GDP.
Finance, Insurance, Real Estates and Other Business
The share of the sector to GDP was recorded at 7.76 percent in 2018 compared to the 7.31 percent in the previous year, increased by 0.45 percentage points. The sector observed significant increase in growth from 3.64 percent in 2017 to 11.72 percent in 2018 which is an increase by 8.07 percentage points given a huge credit growth.
The higher growth was mainly due to better performance by the banking sector as compared to performance of non-banking sector.
Education and Health
Education and health sectors share to the economy stood at 3.33 percent. The sector recorded accelerated growth of 15.39 percent in 2018 as compared to previous year, which was an increase of 21.41 percentage points.
Indirect Taxes
The taxes on products (indirect taxes) increased to 18.45 percent as compared to previous year, the increase was one of the highest within the past six years.
The increase in taxes on product were attributed to the increase in collection from beer, aerated water and alcoholic drinks, excise duty and import duty. In terms of current prices, the sector was estimated at Nu. 9,839.68 million in 2018 accounting for 5.88 percent of GDP.
GDP calculation
GDP calculation is arrived from three figures which is Final Consumption Expenditure which is both the government and private expenditure at growing by 12.6 percent, net export of 13.03 percent and Gross Domestic Capital Formation of -5.54 percent.
Final Consumption Expenditure is made up ofPrivate Final Consumption Expenditure of Households and General Government Consumption Expenditure.
The private final consumption expenditure growth accelerated to 14.89 percent as compared to a growth of 5.14 percent in 2017.
In current value terms, the private final consumption expenditure was estimated at Nu. 101,216.80 million in 2018 and its share stood at 60.49 percent of GDP.
The government final consumption expenditure (GFCE) accounted for 22.06 percent of the total final consumption expenditure. The share of the GFCE to GDP was estimated at 17.12 percent in 2018.
The GFCE observed decelerated growth of 3.05 percent in 2018, down by 0.17 percentage points from 2017.
Gross Domestic Capital Formation (GDCF) is essentially the expenditure made on investment made by all productive units within Bhutan. It’s decline to -5.54 percent in 2018 is down from negative -2.17 percent in 2017.
Within the GDCF, construction with a share of 66.67 percent of GDCF, the subsector recorded a negative growth of (-10.3) percent in 2018 as compared to 3.24 percent in 2017, down by 13.61 percentage points.
However, investment in machinery and equipment saw positive growth of 3.15 percent in 2018 as compared to a negative growth of -7.73 percent in 2017.
Trade balance worsened by 13 percent in 2018
The trade balance in current price was recorded at deficit of Nu. 41,951.28 million in 2018 and it accounted for 25.07 percent of the GDP. The trade deficit worsened in 2018 as compared to preceding year. In 2018, the trade deficit increase to 13.03 percent as against -9.33 drop in 2017.This was increase of 22.35 percentage points
In 2018, the economy noted deceleration in export growth to 4.58 percent from 6.45 percent growth in previous year. The export of goods accounted for 80.30 percent of the total export. On the other hand, export of services accounted for 19.69 percent of the export, and it recorded a negative growth of -7.65 percent as against accelerated growth of 32.35 percent in 2017.
The total value of export of goods and services in current price was valued at Nu. 51,570.34 million in 2018. The export of goods and services accounted for 30.82 percent of the GDP.
The total value of import in current prices was recorded at Nu. 93,521 million in 2018 compared to Nu. 84,136.81 million in previous year, and it accounted for 55.89 percent of the GDP. Within the Imports, goods accounted for 80.27 percent and services 19.73 percent.
Import of goods and services grew by 8.21 percent in 2018 as compared to contraction in growth by -0.95 percent in 2017. The import growth increased by 9.16 percentage points during the year. In 2018, import of goods observed a growth of 4.65 percent and services by 25.56 percent.
