The finance ministry has released estimates indicating a slowdown in the country’s economic growth rate to 3.16 per cent for the current financial year. This contrasts with the World Bank’s forecast, outlined earlier this week in its South Asia Development Update, which anticipated Bhutan’s GDP to expand by 4.9 per cent. The finance ministry attributes this downward revision to underperformance in the electricity and construction sectors.
Following a 5.2 per cent expansion in 2022, the projected economic growth rate for 2023 has been revised downwards by 0.6 percentage points from previous estimates.
According to the finance ministry’s Macroeconomic Situation Report, the robust growth witnessed in 2022 was driven by strong domestic demand due to increased public spending, investments, and social transfers from the Druk Gyalpo’s Relief Kidu.
However, this growth momentum decelerated as the effects of fiscal and monetary stimulus waned.
In 2023, growth will be predominantly propelled by the service sector, expected to contribute 5.52 per cent to the overall growth estimates.
However, the industry sector is estimated to experience a decline in 2023, with a growth rate of -2.71 per cent. The report attributes this downturn to reduced government and hydropower construction expenditure, alongside decreased revenue from electricity generation.
Despite the subdued figures for the ongoing financial year, the forecast from the finance ministry indicates a significant upturn in the economy, with an anticipated expansion of 5.6 per cent in the financial year 2024-2025.
This growth is projected to surge even further to 8.97 per cent in the subsequent year.
This robust growth trajectory is attributed to the anticipated revenue generated from the commissioning of the Nikachhu and Punatsangchhu-II hydropower projects, as well as an increase in government spending in the 13th Five-Year Plan.
Sherub Dorji
