RMA explains how growth hit 2.1 percent in 2013

Bhutan’s Gross Domestic Product (GDP) saw its lowest growth rate in 2013, at 2.1 percent, reports the Royal Monetary Authority’s Annual Report 2013-2014 which goes into depth on the issue.

In 2012, the GDP growth recorded at 5.1 percent and the highest growth recorded in 2007 at 17.9 percent. The report points to decline in manufacturing, construction and general government sector as factors contributing to the GDP decline.

However, mining and quarrying, electricity and water, agriculture, livestock and forestry saw relative growth, contributing to the growth in 2013.

The performance in the secondary sector share was at 1.5 percent to the real GDP. However, comparing to the 2012 performance it has dropped from 2.9 percent. The tertiary sector saw a decline since 2011 and primary sector’s contribution increased from 0.3 to 0.4 percent.

Bhutan’s per capita GDP in 2013 decreased to USD 2440 from USD 2533 in 2012. Meanwhile, the unemployment rate increased from 2.1 percent to 2.9 percent in 2013.

In nominal terms, GDP increased by 7.1 percent to Nu 104.4bn in 2013 from Nu 97.5bn in 2012. The report states that in terms of sector shares in nominal GDP, the agriculture, livestock and forestry sector, the construction sector, the electricity and water sector, general government sector, and transport, storage and communication sector have been the five largest sectors for the last decade.

Construction accounted for 16.9 percent of nominal GDP in 2013, followed by agriculture, livestock and forestry at 16.2 percent, electricity and water supply at 14.2 percent, and community and social services at

11.1percent.

The primary sector consisting of crops, livestock, and forestry and logging activities recorded real growth of 2.9 percent in 2013. Its share in nominal GDP increased by 0.2 percent to 16.2 percent in 2013. The growth is accounted due to growth in crop subsector from 3.9 percent in 2012 from 2.4 percent in 2012 followed by growth in livestock from 2.4 percent from 1.3 percent in 2012.On the other hand, growth in forestry and logging declined from 3.3 percent to 1.6 percent in 2013.

The secondary sector contributions to nominal GDP saw improvement to 42.3 percent in 2013 from 41.6 percent in 2012. While the annual real growth of secondary sector dropped to 3.5 percent in 2013 compared to 6.8 percent in 2012.

The report points out that there was a rebound in the mining and quarrying sub-sector and the electricity and water sub-sector from negative growths in 2012.

However, the manufacturing and construction sub-sectors both recorded negative growth of 7.2 percent and 2.1 percent respectively in 2013 due to Rupee shortage, and temporary restrictions on access Rupee for private home constructions and vehicle imports.

The electricity and water subsector saw a major turnaround in the performance of this sub-sector in 2013 with a real growth of 10.7 percent after negative growth in the two preceding years. Growth was mainly due to the increase in hydropower generation by the four generating plants, Chukha, Basochhu, Kurichhu and Tala hydro projects.

Mining and quarrying subsector saw a real growth of 36.2 percent in 2013 from the negative growth of 2.2 percent in 2012.

The tertiary sector saw decline growth from 4.3 percent in 2012 to 0.3 percent in 2013. The sector performance was much lower than the primary and secondary sector while its share in total GDP remained more or less steady at 41.5 percent.

The wholesale and retail trade, and transport, storage and communication, sub-sectors displayed positive growth in 2013, although it is a slower growth compared to 2012.

The community, social and personal services (public administration, and education and health) sub-sector continued to record negative real growth for a second consecutive year.

The sub-sector banking services, insurance services, real estates and dwelling services and other business services saw growth in 2013 with a real growth of 1.9 percent from negative 7.2 percent in 2012. Finance and insurance, and real estate and dwellings grew by 1.5 percent and 3.6 percent respectively in 2013. However, business services recorded a negative growth of 1.5 percent in 2013 compared to 18.8 percent in 2012.

The subsector community and social services by government contributed 11.1 percent of nominal GDP which was 11.5 percent in 2012.

The activities in this sub-sector, like public administration, education and health services saw negative growth of 5.2 percent in 2013 to 6.4 percent in 2012.

The report says the expenditure rationalization and austerity measures put forth by the government to curtail wasteful expenditure and efforts to contain the fiscal deficit have contributed to the negative growth of this sub-sector in the past two years.

The sub-sector government’s final consumption expenditure saw decline by 2.23 percent in 2013. It contributed 11.1 percent, which saw decline by 0.4 percent from 2012. In 2013, the subsector private, social and recreational services, the sub-sector saw 2.7 percent growth while previous year, 2012, recorded at 2.6 percent.

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