Bhutan’s economy is projected to grow by nearly seven per cent this year, with growth expected to pick up further next year. It is driven largely by the construction of large-scale hydropower projects. This is according to the latest Asian Development Bank Outlook 2026.
According to ADB’s outlook, industrial output is projected to increase to more than twelve per cent this year and 10.6 per cent next year.
It is expected to remain the primary driver of economic activity over the years.
However, fiscal deficit is expected to widen to 3.5 per cent this year as capital expenditure increases.
This is due to the implementation of the 13th Five-Year-Plan and a decline in revenue due to the rollout of tax reforms this year.
Moreover, the outlook also forecasts that a prolonged conflict in the Middle East would increase fuel and import costs, which would further expand the fiscal deficit.
Last year, Bhutan’s economy grew by 8.5 per cent, driven by hydropower expansion, a surge in industrial activity and tourism sector.
Electricity generation increased by over 20 per cent, supported by the commissioning of projects like the 1,020 MW Punatsangchhu-II hydropower project.
Tourism also rebounded, with arrivals rising by 30 per cent, boosting activity across hotels, restaurants, and transport services.
However, inflation climbed to 3.5 per cent last year, with food inflation reaching 5.5 per cent.
At the same time, fiscal deficit widened to 2.7 per cent of GDP, as government expenditure rose to 30 per cent, driven mainly by increased capital investments.
Deki Lhazom
