The projection is as per the Asian Development Bank (ADB)
Bhutan is likely to maintain its position as the fastest-growing major economy with the ADB outlook projecting a growth rate of 7.5% for FY2022-23 on strong investment prospects.
The Asian Development Bank Outlook 2022 states that Bhutan’s growth in the next fiscal year FY23 will accelerate further to 7.5% though India will witness an acceleration in growth to 8% in 2023.
The Asian Development Bank (ADB), however, flagged inflation as a major issue mainly on account of a rise in prices of commodities in wake of the ongoing Russia-Ukraine war.
However, driven by strong investment growth, with public investment helping crowd-in private investment. ADB expected a GDP growth rate of 3.5% this year and forecasted 7.5% in the next year.
According to the Bhutan Resident Mission (BHRM) of ADB Bhutan, economist in developing countries are starting to find their footing as they slowly emerge from the worst of the COVID-19 pandemic and the global factors may not impact at a greater scale.
An official from the BHRM of ADB Bhutan said that the implications of the Russia-Ukraine war in Asian countries have assumed that the severity of the COVID-19 pandemic would subside with a rise in vaccination rates.
“The current scenario in Asian countries contributing to a significant slowdown in global growth in 2022 adding to inflation, Bhutan will certainly improve its economy,” an official said adding ADB is hopeful that with the relaxation, as the economic recovery activities have already begun.
An official added that though the global economic recovery is picking up its pace, it is also facing significant headwinds amid new waves of COVID-19 infections, persistent labor market challenges, lingering supply-chain challenges, and rising inflationary pressures.
According to the World Bank’s latest Global Economic Prospects report, following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, the Russia-Ukraine war, debt, and income inequality that could endanger the recovery in emerging and developing economies.
ADB states that Bhutan’s economy is depending on the global economy and it is in a very slim line and will not suffer from global economic shock.
“Bhutan’s economy is not one-on-one dependent and would not face transmission of economic shock,” BHRM states.
Asian Development Outlook report states that Bhutan’s economic recovery will be through all primary, secondary, and tertiary sectors. Focusing on agriculture will contribute to the economic recovery.
“Resuming industrial operations like mining, construction, electricity, and water from the secondary sector will help to improve the economy and while services like hotels and tourism and entertainment from the tertiary sector will also help,” the report states.
However, the robust recovery will be driven by strong consumer spending and some uptake in investment, with trade in goods surpassing pre-pandemic levels, according to the BHRM.
Meanwhile, ADB Bhutan is also optimistic that the economic growth rate would not go down like in the previous pandemic years. The growth rate in 2020 was –10% and 4.09% in 2021.
“Supply chain is restored and economic activities are improving,” ADB Bhutan states adding that the inflation caused by the increased prices of oil and some other items is offset by the decreased prices of commodities and others.
In achieving the forecasted economic growth rate, ADB Bhutan states that all sectors should share equal responsibilities. There should be a reconsideration of the Covid protocol as a short-term measure.
“The country cannot rely on a few sectors and for the long term, there should be economic diversifications. Initiatives for improving vocational skills, technical training, and creation of employment opportunities are required and food self-sufficiency should be taken care of,” ADB Bhutan states.
“Both the public and private sectors should take responsibility to contribute to economic development. Development partners should continue to provide technical and financial assistance,” the report states.
ADB has set priorities for Bhutan to invest in traditional hydropower energy and renewable energy (solar). It has a plan to invest in road, TVET, health, and other sectors.
ADB is also helping Bhutan diversify its economy, catalyzed private sector growth, improve connectivity, build climate-resilient infrastructure, and strengthen human capital.
Further, ADB is one of Bhutan’s largest sources of official development assistance, with average annual lending of $52.1mn—$25.6mn loans and $26.5mn grants—from 2018 to 2021.
Sangay Rabten from Thimphu