4 November, 2009 - Bhutan’s gross domestic product (GDP) growth slumped to one of its lowest at 5 percent in 2008 despite the Druk Phuensum Tshogpa’s target of achieving a 9 percent growth rate annually.

The 5 percent growth rate is the lowest since 2000.

The slide in the growth rate is largely attributed to the negative growth rate in the construction industry at -6.4 percent, forestry and logging at -2.6 percent and poor or average performances in trade, mining and transport and communication and education and health services.

Bhutan recorded one of the highest growth rate in 2007 at 19.7 percent when hydro projects like the 1020 MW Tala spurred the rate. “In 2008 there were no major construction projects after the completion of Tala, few government projects and activities this year and also the high inflation could have affected the growth of trade,” said Dechen Wangdi, the officiating director of the National Statistics Bureau (NSB).

- GDP from 36.1 billion in 2007 to Nu 37.9 billion in 2008 - Inflation in 2008 at 8.3 percent, highest ever - Per capita income at US $ 1852 compared to 1321 in 2006 - Mainly poor or average performance in most economic sectors in 2008

The DPT manifesto says “a high economic growth rate which is inclusive and equitable is the only long term solution for poverty reduction and improvement in the living standards.” The manifesto aims to reduce poverty from the current 23 percent to 15 percent by 2013. It also says that a high growth rate is essential for a national self-reliance and a smooth transition to democracy.

“The average growth rate for economic development in the last decade has been at around seven percent but the government wanted to do better at nine percent,” said the head of good governance section in the cabinet secretariat and DPT party member, Dr Saamdu Chetri. “With inflation going up to 9.2 percent and a global recession, a growth rate of five percent is still an achievement.”

He said that the government would achieve an average growth rate of nine percent by 2013 and reduce poverty. The DPT government also had to face the highest inflation rate at 8.3 percent in 2008. “Inflation was high due to the global food crisis along with record oil prices,” said Dechen Wangdi.

Meanwhile, sectors like hotels and restaurant because of a good tourism year helped by the centenary and coronation celebrations performed well. Finance has also grown with banks and financial institutions offering numerous schemes. Agriculture has performed the same as in 2007 while livestock has improved.

People in the year 2008 spent less on entertainment, sports and other recreational activities, which have grown by only 2.5 percent compared to 6.9 percent in 2007. “With high inflation leading to high prices people have curbed their budgets on entertainment,” said Dechen Wangdi.

The government’s current expenditure on administration like civil service salaries, office equipment and etc has gone up, but it’s activities in public education and heath went down to 3.1 percent in 2008 compared 10.3 percent in 2007. The government’s overall services, which includes all agencies is lower this year at 3.1 percent compared to 3.2 percent last year.

In manufacturing negative growth rates were observed for cement, wood and agricultural input industries.

NSB has however forecast a growth rate of 7 to 8 percent in 2009 with hydro projects and other projects taking off this year.