MoEA Minister lists out how pandemic has hollowed out the economy from small businesses to big industries

Economic growth of 5% not possible in 2021-2022 says MoEA Minister

Additional worries about inflation and shortages due to war in Ukraine

The Ministry of Economic Affairs had signed an Annual Performance Agreement (APA) to bring the economy to a growth rate of 5% by 2021-2022 but Lyonpo Loknath Sharma said this is no longer possible due to several factors.

He said mineral exports and manufacturing picked up a bit in 2021 but it was not like before, and the pandemic and the lockdowns had their impact on the entire economy.

He said Pasakha Industries in 2018-19 would come up with revenues of Nu 15 to Nu 16 bn a year but with the pandemic the industrial estate is functioning at only 50 to 60% capacity. He said that while Ferro Silicone has done well due to the high prices all other industries are hit.

Lyonpo said that many small business outlets along the border and in Phuentsholing and Gelephu like automobile workshops, furniture outlets etc that relied on day workers from India are all closed.

He said many small businesses are badly hit but one does not get to see that. “Sometimes I get frustrated why I had to be the MoEA Minister now,” said Lyonpo.

Lyonpo said the pandemic had also caused supply chain issues of men and materials. He said that both import and export were hit as a lot of imports are raw materials for exports.

For essential commodities, his team at the MoEA has to work hard and everyday they have a meeting at 4 pm to ensure the supply of essential goods.

The minister said that the Kidu of His Majesty and other ideas and visions helped a lot in stabilizing the economy and avoiding a worse fate. 

Lyonpo said the pandemic also impacted the movement of RNR products or agricultural products, and the price of transportation shot up due to the requirement to switch vehicles and drivers which impacted the price of goods.

“I have heard that a bolero that used to charge Nu 1,800 per trip doubled the rate after the pandemic,” said Lyonpo.

He said a RMA study has said that the various modalities have added 7.2% in additional cost in the economy at the minimum, but the minister said that on the higher side the actual rates could be much higher and he was even expecting 20%.

The minister said that trading was also hit as the MDP in Phuentsholing can only handle around 100 trucks a day where as in normal times 300 to 350 trucks used to enter Phuentsholing in a day.

The minister said that Bhutan’s cement plants will take a major hit now as the price of coal has gone up internationally. He said cement plants in Bhutan need a mix of Bhutanese and imported coal.

The minister said that in 2020 exports were down by 28 percent and in 2021 it is down by 15% compared to normal times.

Lyonpo said the pandemic has hit small restaurants, small hotels and other small businesses.

He said in Phuentsholing due to the various restrictions in movement, the people of the other gewogs in Chukha and other places could not travel to the border town and so Phuentsholing lost around 30 to 40% of its customers. 

However, the minister said that if the restrictions and lockdowns had not been applied then the virus would have spread to the villages and that would create more chaos as one cannot lockdown farmers easily. He said it would have impacted food production with the impact also traveling to urban areas and then there would be real poverty and issues then.

He said the restrictions in fact have saved the economy from a much more devastating damage.

Lyonpo said that the flip side of the restrictions is that public endurance has come down and so now people want to lead a normal life with their own choices. He said the people feel that the restrictions of the two years have been too long.

The minister said that, especially in the south, people are unable to go to hospitals and when they want to move out for health or business reasons they are not able to do so on time -as there is a long list ahead of them due to the limited quarantine facilities and so people get frustrated.

The minister said that with the relaxations from April onwards he said he is sure there will be a smart way forward to get in fully vaccinated tourists in a bubble mode. He said that MICE tourism in bubble mode will not be a bad idea. Lyonpo said the hotels are not in a good shape.

The minister said that an additional worry now is the war in Ukraine. He said that 57% of the global cooking oil ingredients supply comes from Ukraine and Russia and similarly 14% of the world’s fertilizers at a time when there is already a shortage.

He said the two countries also account for 30% of the global supply of wheat.

The minister said that with fuel prices now going up it will impact inflation as 25% of the CPI is tied to the price of fuel.

The minister said that the impact of the war will lead to higher inflation and possible food and commodity shortages too.

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