Tshering Dorji

The country’s economy witnessed a Gross National Savings of Nu 41.9B in 2018 against Nu 41.6B in 2017, a slight increase by about Nu 351.74M.

Of the total national savings, government savings was Nu 6B. Private savings (Households, Private and Public Corporations) was Nu 35.9B.

This is a growth of 0.85 percent.

Gross National saving is derived by deducting final consumption expenditure from Gross national disposable income and consists of savings such as personal, business and government.

Basically, it looks at the difference between the nation’s income and consumption and is an indicator of a nation’s financial health, as investments are generated through savings.

It can, however, be misleading because the government usually operates at deficit, which would lower the national savings rate.

For instance, a country’s national savings is the total of its domestic savings by households and companies (private savings), as well as government savings (public). Despite trade and current account deficit, it also takes into account capital inflow from loans and grants, which gives a room for disposable income. This means investments, both within and from outside, would be factored for the sake of National saving.

The national accounts statistics compiled by the National Statistics Bureau (NSB) stated that there was a consistent increase in final consumption expenditure of the households and the government. The poor net inflow of primary income from abroad led to the sluggish increase in national savings, according to the NSB.

Although there was a marginal increase in national savings in 2018, the gross national saving could not meet the investment requirements of the economy.

The nominal investment in 2018 was estimated at Nu 79B (Nu 83B in 2017). In real terms, investment recorded further drop of (-5.54) percent in 2018 against the negative growth of (-2.17) percent in 2017, down by 3.37 percentage points. Saving-investment (SI) ratio for the economy was recorded at 0.46 in 2018, down by 0.05 percentage points from 0.51 in 2017.

The SI ratio is obtained by dividing the total saving over the cost. For example, if you have to make an investment of Nu 1,000 for the savings of Nu 2,500 over five years, the SI ratio is 2.5 (from $2,500/$1,000), or 25 percent.

Economic theories say that at least 20 percent of one’s income should go towards savings; another 50 percent (maximum) should go towards necessities; and 30 percent towards discretionary items. This is called the 50/30/20 rule of thumb.

The national accounts statistics also reveal that final consumption expenditure recorded a growth of 12.16 percent in 2018 compared to a growth of 4.96 percent in 2017, an increased by Nu 129B.

The private final consumption expenditure growth accelerated to 14.89 percent compared to a growth of 5.14 percent in 2017. In current value terms, the private final consumption expenditure was estimated at Nu 101,216.80M in 2018 and its share stood at 60.49 percent of GDP. The share increased by 6.60 percentage points during the year.

The government’s final consumption expenditure accounted for 22.06 percent of the total final consumption expenditure. This represents an increase in share of 1.71 percentage points compared to preceding year. There so was a deaccelerated growth of 3.05 percent in 2018.