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All-time low inflation rate in 2016

February 3, 2017 Business Leave a comment 22 Views

Inflation: The economy saw one of the lowest inflation rates last year at 3.22 percent. This
figure is the lowest annual inflation the National Statistical Bureau (NSB) recorded since 2004.

However, the lower inflation rate will not translate into an absolute decrease in price of goods
and services. It entails a slower rhythm to the price increase.

From 8.8 percent in 2011, inflation hit an all-time high of 11 percent in 2012. After a persistent
figure of about 8 percent for the two successive years, it came down to 4.58 percent in 2015 on
the back of a fall in global fuel prices.

An official from the bureau said that last years inflation is one of the lowest figures realised in
this decade. It was, however, attributed to stabilisation of prices. There werent much
fluctuations in the price of goods and services that have more weightage, he said.

For instance, there was little change in the fuel price but insignificant to influence the overall
inflation. The revision on vehicle taxes, he said, had made its mark in 2014. Thereafter, the prices
of vehicles did not change radically.

Following the salary raise, house rents had also experienced a double-digit price increase in 2014
and 2015. This too was brought down to three percent last year.
The NSB official said that food commodities, transport, including fuel prices and housing and
electricity are attached more weights for the sake of calculating inflation.

Weights reflect the relative importance or contribution to the total consumption expenditure of all
the households. It is determined using the spending patterns of households. The more current the
weights, the more reflective they are of current consumer spending patterns.

The price inelastic goods, like fuel are attached more weights because despite the change in price
of such goods and services, the demand and the supply is unlikely to be affected.

The current CPI weights were updated in 2012 following the Bhutan Living Standard Survey
(BLSS).

The year-on-year CPI for December last year increased by 4.60 percent. This means that between
December 2015 and December last year, the prices of food and non-food items went up by 5.91
percent and 3.73 percent respectively.

The prices of domestic goods and services increased by 6.24 percent while the prices of imported
commodities went up by 3.10 percent.

The year-on-year inflation felt in December was the highest inflation figure realised last year
following a 3.92 percent increase in November.

The purchasing power of Ngultrum (PPN), as measured by CPI was Nu 78 as of December 2016.
This means Nu 100 in December 2016 was worth only Ngultrum 78 at December 2012 prices.
The PPN has decreased by 4.39 percent between 2015 and December 2016. This is the effect of
the price rise in the economy.

Economic growth could hit 10.2 percent: RMA

January 31, 2017 Business, Lead Story, News Leave a comment 75 Views

Debt level, however, increased by 42 percent

Report: Should the new hydropower construction and commissioning of

ongoing hydropower projects ensue as scheduled, the countrys economic
growth between this and the next fiscal year, is projected to grow at an
average of 10.2 percent. This is according to the Royal Monetary
Authority (RMA).

From a record low of 2.05 percent, the GDP growth gradually soared to
5.7 percent in 2014 and 6.5 percent in 2015.

In its annual report, the RMA stated that the medium-term economic
growth prospects for the country remain favourable.

The RMA projected that both trade and current account deficits are
expected to fall from the average of preceding year of the Plan to 19.8
percent and 24.3 percent of GDP respectively.

As a result, Bhutans overall balance of payments is projected to be

positive, with reserves growing at an average of 14.3 percent per annum
during the period, the report stated.

Yet, it was highlighted that Bhutan continues to face numerous structural

weaknesses and challenges that need close attention to ensure the long-
term sustainability of the economy.

Our economy can no longer be sustained on the back of a single

economic sector although hydropower development remains a vital
catalyst for socio-economic development, the report stated.

The RMA stated that longer-term strategies are needed for structural
transformation by strengthening productive sectors such as cottage and
small-scale industries and development of agriculture sector.

But the current figures reveal that trade deficit remained elevated at over
20 percent of GDP, pushing the current account deficit from 29.8 percent
in 2014-15 fiscal year to 31.2 percent of GDP in the last fiscal year.

It was aid inflow, the capital and financial account surplus has been more
than sufficient to finance the current account deficit.

As of June 2016, the countrys gross external reserves stood at an

equivalent of USD 1.118 billion, of which Rs 20.8 billion were Indian
Rupees and USD 811 million were convertible currency reserves.
While reserves were sufficient to finance 13.2 months of merchandise
imports, reserve buildup is still being driven by aid inflow and
hydropower financing, which are cyclical and temporary in nature.

There has also been a concomitant increase in external debt levels as

Indian Rupee debt has reached Rs 115 billion as of June 2016 and
convertible currency debt stood at USD 609 million.

This is an increase by 42.1 percent and 4.8 percent respectively compared

with the previous year. However, almost all of the convertible currency
debts are concessional loans used for financing various socio- economic
development projects and over 88 percent of Indian Rupee debt are
hydropower debt.

Tshering Dorji

GDP expands to Nu 132B

January 30, 2017 Business Leave a comment 99 Views
GDP: While hotels and restaurants are identified as the fastest growing
slice of the economy, the construction sector has experienced a noteworthy
growth in double digits. Consequently, countrys economy experienced a
growth of 6.5 percent in 2015, as Gross Domestic Product (GDP)
expanded from Nu 119.5 billion to Nu 132 billion.

After the economic slowdown in 2013, real GDP (after adjusting for
inflation) gradually rebounded to 5.7 percent in 2014 and 6.5 percent in
2015. Without adjusting for inflation (nominal GDP), the country
experienced a growth of 10.4 percent.

With the expansion in the size of economy, the Royal Monetary

Authoritys (RMA) annual report states that the countrys GDP per capita
in 2015 increased to USD 2,719.1 from USD 2,610.6 in 2014.

The economic growth, according to the RMA was mainly driven by the
secondary sector. While the contribution of the primary sector has also
increased marginally, contribution of the tertiary sector to GDP has fallen
from 3.8 to 2.4 percentage points.

Going by the sectoral shares to the nominal GDP, agriculture, livestock

and forestry, construction, electricity and water supply, general
government sector (community, social and personal services), transport,
and storage and communication sectors have been the largest sectors for
the last decade. These sectors still continue to dominate the countrys
economy.
Agriculture, livestock and forestry accounted for 18 percent of nominal
GDP in 2015, followed by construction at 17 percent, electricity and water
supply at 16 percent, community and social services at 12 percent, and
transport, storage and communications at 10 percent.

Crops was the main driver of growth in the primary sector from 2.4
percent to 4.6 percent. The share of livestock and forestry sector to
nominal GDP decreased marginally by 0.1 percentage points to 16.7
percent in 2015.

The construction sector emerged as the driver of overall growth that

helped the secondary sector grow by 8.1 percent in 2015 from 3.7 percent
in the previous year.

Gross value added (GVA), which is the total output of the construction
sector after deducting for consumption was estimated at Nu 20.6 billion.
This means the sector has experienced a growth of 11.5 percent.
On the other hand, the mining and quarrying sector recorded a decelerated
growth of 13.4 percent from 17 percent in 2014.

The electricity and water supply sub-sector registered a growth of 7.4

percent in 2015, after it plummeted to a negative growth of 2.8 percent in
the previous year. A favorable monsoon resulting in higher generation in
hydropower, according to the RMA contributed to the growth in the sector.
Consequently, the real value of electricity and water supply increased to
Nu 10.2 billion from Nu 9.5 billion in 2014.

The report highlighted that the export of electricity to India increased by

3.5 percent in 2015, from Nu 10.4 billion the previous year to Nu 10.8
billion. But the overall domestic sales declined significantly by negative
1.3 percent in 2015.

The tertiary sector recorded a decelerated growth, from 8.9 percent in

2014 to 5.4 percent in 2015. Wholesale and retail trade, transport, storage
and communication, and the community, social and personal services
recorded the highest contributions in this sector.

One of the fastest growing sub-sectors in the economy, according to the

report was the hotels and restaurants that recorded a real growth of 16.2
percent in 2015.

The performance of hotels and restaurants is largely attributable to

increased number of tourist arrivals during the year which was recorded at
155,121 tourists. In 2015, the international to regional visitor ratio was at
37:63, with growth rates more significant in the regional segment.

International (US dollar paying) visitor dropped by 15.8 percent recording

48,800 arrivals in 2015 from 57,934 arrivals in 2014 due to the major
earthquake in Nepal leading to numerous cancellations of plans to visit
Bhutan. Correspondingly, there was a decrease in the foreign exchange
revenue collection by 2.8 percent from USD 73.2 million in 2014 to USD
71.2 million.

Tshering Dorji
 3.92 percent CPI registered in November
January 14, 2017 Business Leave a comment 101 Views

this is the highest year-on-year inflation in the last 16 months

Inflation: The price of goods and services between November 2015 and
November last year has increased by 3.92 percent, the highest monthly
inflation last year, as revealed by the consumer price index (CPI).

This is 1.30 percentage points higher than October 2016 which was 2.62
percent. This means that between October 2015 and October last year, the
price of goods and services increased by 2.62 percent.

The prices of foods have gone up 5.49 percent and non-foods by 2.90
percent. While the prices of domestic goods and services has increased by
5.05 percent, imported goods and services contributed 2.90 percent to the
year-on-year inflation in November.

The consumer price index also revealed that the price of domestic food
commodities increased by 7.77 percent and the price of imported food
items by 3.70 percent. This means that the increase in price of locally
produced goods and services have contributed more to the overall
inflation.

Among the food items, the price of fish between November 2015 and
November last year has increased by 7.5 percent. Prices of bread and
cereals have gone up by 5.9 percent and vegetables by a staggering 13.12
percent.

Among the non-food basket commodities, fuel and lubricants prices

increased by 5.13 percent, house rents by 5.24 percent and clothing by
around four percent.

Inflation, a local economist said is sometimes seasonal. For instance the

price of vegetables is bound to increase when the farming season is over.
CPI is one of the major indicators that determine the effectiveness of an
economic policy. It is used to formulate fiscal and monetary policies and
monitor their effect on the overall economy. In other parts of the world,
business executives, labor leaders, and the private sector use CPI as a
guide to make economic decisions.

The CPI also dictates the interest rates and other monetary policies. An
increase in the supply of money typically lowers interest rates, which, in
turn, generates more investment and puts more money in the hands of
consumers, thereby stimulating spending.

The Central Bank also uses the cash reserve ratio (CRR), which is the
minimum requirement that commercial banks must set aside from their
deposits with the Central Bank, to control inflation. Higher CRR
requirement translates into less money with banks to lend.

However, to determine the CPI, different weights are assigned to reflect

the relative importance or contribution to the total consumption
expenditures of all households. The present market basket has 151 items
(436 varieties), which is updated periodically depending on the
consumption pattern.

So the elasticity of goods and services influence the inflation rate because
price inelastic goods like fuel, for instance, would impact inflation, since
demand is not likely to fall, irrespective of an increase or decrease in
price. So more weights are assigned to such commodities.

For collection of the prices of different commodities, the National

Statistics Bureau has identified sample outlets, which are permanent
establishments or retail shops from where monthly price of goods and
services are collected.

Meanwhile, the overall inflation last year is expected to be the lowest in

more than 10 years.

Tshering Dorji
 Ngultrum value falls in Pling
December 26, 2016 Business, Lead Story Leave a comment 239 Views

Currency: Indian Rupees (INR) are once again being illegally sold across
the border.

Both Bhutanese and Indian nationals in need of INR are paying between
Nu 108-112 for INR 100. The commission depends on the amount being
exchanged.

With the demonitisation process coming into effect on November 8 in

India, many attempted to bring the old denomination notes of INR 500 and
1,000 into Bhutan as banks here were still accepting the notes then.

People from across the border were also giving commission in exchange
for Ngultrum.

However, the current situation is seasonal as many pilgrims are flocking to

Phuentsholing on their way to holy sites in India such as Bodhgaya. It is
also the orange export season.

As a result, pilgrims, ticketing agents, and exporters need INR.

A ticketing agent, Pema Tshering, said they are able to acquire INR only
by paying commissions. We dont get it from financial institutions so
there is no other option, he said.
The Royal Monetary Authority (RMA) office and banks in Phuentsholing
do not provide INR.

It is available only at the RMA in Thimphu. The RMA is receiving INR

130 million a week from India. Only 200 people can exchange Ngultrums
for INR 5,000 each in a day.

A travel agent, who wished not be named, said they are therefore
compelled to buy INR from across the border. We pay commissions of
between Nu 10 or Nu 12 to dealers, he said.

However, the travel agent said villagers buying INR are being charged as
much as Nu 20 extra for ever INR 100.

The number of pilgrims this season is expected to be higher than previous

years because of the Kalachakra initiation next month.

For orange exporters, INR is needed for transportation.

An exporter, Kinley Dorji, said they paid Nu 14,000 to ferry a truckload of

oranges to Burimari on the India-Bangladesh border. The normal cost is
Nu 11,000.

Transportation charges have increased for us due to higher commission

we pay to buy INR, he said. Drivers face the direct impact but we are
the ones affected.

The availability of less INR across the border due to withdrawal limits is
also contributing to the illegal practise. Indian nationals are allowed to
withdraw only INR 4,000 from banks in a day and INR 2,000 from
ATMs. While to what extent the cash crunch is having on the problem is
yet to be determined, it is creating opportunities for those who can avail
more INR and are seeking a profit.

A Phuentsholing hotelier said even people from across the border do not
have INR these days because of the demonitisation process.

They also need INR to do business, he said.

With the onset of winter, Phuentsholing becomes a prime destination for

those looking to escape the cold and shop. The town also attracts
numerous organisations, both government and private, for workshops and
trainings. This means the demand for INR by Bhutanese increases further
boosting the illegal racket of INR transactions.

Rajesh Rai | Phuentsholing