With an average growth of 8-9 percent, Bhutan was among the fastest growing economies in the region before COVID-19 crisis took the world by storm. Today is a much different story with the pandemic grinding the economy to a near halt. The COVID-19 crisis has pushed Bhutan’s economy to the brink with growth projected to plummet to a record low of 1.1 percent, a massive slump from pre-COVID growth.
Immediate relief measures to secure livelihoods of those hit hard by the pandemic’s socio-economic blows and tax incentives for businesses have resulted in a fiscal deficit of 6.18 percent, the worst in recent years. The near-term growth outlook looks grim and uncertain. The country is likely to tip into further deficit of 7.36 percent, according to a June forecast.
The tourism sector, a major national revenue earner, has taken a massive hit. Construction and manufacturing sectors are experiencing unprecedented downturn. The financial institutions are grappling with record-high non-performing loans. This widespread economic damage has reversed Bhutan’s development gains made over recent decades.
It’s time to rethink and reshape the economy
While the pandemic has been catastrophic in every sense of the word, it also presents an exciting opportunity-- the possibility to shift to a trajectory of resilient, sustainable and inclusive economy. It is an opportunity that should not be missed. But many questions remain. How do we turn around the brutal numbers for a sharp rebound from the unprecedented slump?
Certainly, a ‘business as usual approach’ is not an option. Tough, uncertain times like these call for new, innovative and bold ideas, actions and approaches. And the government alone cannot tackle the sea of unprecedented challenges thrown up by the COVID-19 pandemic. Tackling the crisis of this scale requires a whole-of-society approach with heightened level of cooperation and engagement.
On 13 October, Scott Standley, Economist with UN Bhutan will sat down with Dorji Phuntsho, CEO of Royal Securities Exchange of Bhutan, Phub Dorji, a Data Enthusiast and Thinley Choden, an Impact Investor, for a live conversation to discuss possible transformational policy choices and investments that can and must be made to revive Bhutan's economy.
The Conversation Series also featured Hamid Rashid (PhD), Chief, Global Economic Monitoring at the UN Department of Economic and Social Affairs (UN-DESA) and lead author of the UN flagship publication World Economic Situation and Prospects. Dr. Rashid joined LIVE from New York to share global perspectives and recommendations for Bhutan.
What innovative financing options can Bhutan explore to build forward better? What policy changes need to be made to promote a thriving economy with greater ease of doing business? What other economic opportunities are emerging as a result of the current pandemic? These were but a few questions that our Conversation Series panel on ‘Future of Economy’ discussed.
“The COVID-19 pandemic has exposed and amplified the existing workforce vulnerabilities, resulting in job and income losses, especially for those vulnerable individuals in informal sectors,” UNDP Resident Representative Azusa Kubota said.
“The session dsicussed no-regret policy options and investments that decision makers can invest in while seizing the opportunity created by the pandemic. Such choices will allow us to achieve a suitable and inclusive recovery from the world’s greatest economic recession since the World War II.”
“Our economy paused when the tourism industry that employed thousands and benefited the hotel industry, the artisans, and the rural home-stay owners faced the wrath of the pandemic. Our hopes in the hydropower quivered when a skills gap was created with expatriates leaving the country in droves and the construction industry, similarly, came to a halt threatening high non-performing loans,” said BCMD Executive Director Chencho Lham.
“But the tensions of the pandemic also create an opportunity for us to rethink our economy. While livelihood is an immediate need of the hour, it is in our interest to revisit economic development plans and fiscal policies for a future that is more equitable, resilient and sustainable.”
This discussion on ‘Future of Economy’ was the second of UNDP-BCMD Conversation Series on “Reimagining Bhutan: Building Forward Better Beyond COVID”. The next series will tackle the theme of “Green Recovery”.