Scorching Inflation: Nu 100 in 2022 worth Nu 60 in 2012

We often hear that living in Thimphu is very expensive, and more so with the increasing rate of inflation. Looking at the Consumer Price Index (CPI) shared by the National Statistics Bureau, the purchasing power of Ngultrum has gone down.

Currently, Nu 100 in November 2022 is worth Nu 60 in December 2012. The Purchasing Power of Ngultrum as measured by CPI has dropped by 4.39 percent in the last one year due to price increase in the economy.

This can be attributed to the price of consumer goods and services as it increased by 4.59 percent in November 2022 compared to the same month last year.

Food and non-alcoholic drinks recorded a 2.24 percent increase, contributing 22 percent to overall inflation, while transportation recorded an increase of 11.80 percent, accounting for 39 percent of overall inflation.

Clothing and footwear saw the second-highest growth at 7.28 percent, adding 10 percent to inflation as a whole.

Similarly, in 2021, about 60 percent of the overall inflation rate in 2021 was attributable to food prices, with the other 40 percent coming from non-food items. Inflation in 2020 was mostly driven by increases in food costs, which accounted for over 90 percent of the overall increase.

The CPI for November 2022 is 0.66 percent which is an increase from 0.63 percent in October 2022. Prices for both food and non-food items went up in compared to the previous month by 1.12 percent and 0.27 percent respectively.

Except for the housing and utilities, which decreased by 0.04 percent, the prices of all the other eleven major divisions have increased.

Rise in transportation cost can be attributed to Russia-Ukraine war which has impacted the prices of fuel price.

The prolonged global pandemic and the Russia-Ukraine war had impacted the global economy and has contributed to inflation.

Shopkeepers have been impacted by the decrease in the consumer spending and inflation. According to Chimi from C-Mart, she said that the market is down, and there is decrease in the numbers of customers.

“Since August, number of customers have been dropping. It might be because of the inflation as the price increases, the consumers’ purchasing power is down and it might be also because of consumer deflection, I’m not sure.  With increases in price, there are hardly any customers, and it is quite hard to sustain our livelihood.”

“With inflation and less purchasing power of people, it affects the middle income and low-income group more. This can also lead to increase in the gap between rich and poor. The financial burden on low-income group will be high,” shared Tshewang.

With concerns on inflationary pressure on food basket and a looming global recession, Minister of Economic Affairs, Lyonpo Loknath shared his concern.

“While recession looks inevitable that might hit to high inflation, low wages and job cuts and also impact on tourism. Besides general consumption cut would also lower aggregate demand slowing the economy. If it hits this region, our exports will be affected. However, the signs so far are not very bad and we need to continue preparing and watching the scenario.”

He added that recession is tough on any country, and a global recession, at that, will be tough, however, the a minimal impact on India will not impact Bhutan hard.

He said, “Minimal impact on India will not impact us, however, if India gets affected, we have to prepare for the worst-case scenario. It will be difficult to withstand, but measures to mitigate the impact through domestic support have to back up, similar to the situation of the pandemic.”

The inflation rate of the country rose to 6.54 percent in June 2022, and dropped to 4.59 percent in November 2022, according to NSB.

Prices of various food and consumer items have only been shooting up.

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