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Covid-19 restrictions, lower hydropower output to cap Bhutan's growth

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| August 20, 2021 11:15:26 AM IST
Fitch Solutions on Friday revised up both 2020 estimate and 2021 forecast for Bhutan's real GDP growth to minus 1.8 per cent and 4 per cent from minus 2.4 per cent and 2.9 per cent previously.

The 2020 revision was made after updated data releases showed that exports had remained resilient in 2020 despite the pandemic even as imports declined by a larger extent owing to domestic economic weakness.

For 2021, Fitch expects improved external demand from India to support Bhutan's exports.

However, it said, the economy's rebound will be capped owing to falling hydropower output on less favourable weather, and Covid-19 containment measures being in place despite strong vaccination progress which will restrict a domestic activity rebound.

With the Indian economy on a normalisation path, being likely to notch real GDP growth of just under 10 per cent in the fiscal year 2021-22, reversing a 7.3 per cent contraction in FY2020-21, this bodes well for Bhutan's exports of which 94 per cent are destined for India.

This is likely to see exports such as ferro-alloy, cement, and dolomite which suffered in 2020 stage a rebound, given increased input demand for India's construction and manufacturing industries.

A recovery in these exports imply a recovery in the mining and quarry sector. Imports are also likely to rebound as domestic demand recovers but will unlikely match 2019 levels in 2021 in real term, said Fitch. (ANI)

 
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