However the growth is expected to pick up to 4.6% in FY 2024-2025
The country’s economic growth is expected to slow to 4% in the fiscal year (FY) 2023-2024, which is from July 2023 to June 2024. This is according to the latest report titled ‘Global Economic Prospects’ released by the World Bank (WB).
According to the report, the slow growth is attributed partly to the reductions in public investment and capital expenditure.
However, the report stated that the economy will still benefit from a strong performance in tourism related services where the growth of the country is projected to pick up to 4.6% in the FY 2024-2025, reflecting a recovery in industrial and services activities, and the commissioning of a new hydro-plant.
For instance, forecasters say corresponding impacts to be felt in 2024 through recession and sluggish economic activities, resulting in percentage points drop on the country’s GDP.
The Bhutanese economy in general indicates an unconvincing demeanor in the last quarter of this calendar year and the entirety of next year, although a hint of positivity radiates in specific cases as forecasted by economic experts.
The rate of inflation in the country which is actually hovering at 5% is however forecasted to subside to 3.4% by the end of next year. The inflation rate in Bhutan increased to 5.03% in September from 4.75% in August of last year. Inflation rate in Bhutan averaged 5.28% from 2001 until 2023, reaching an all time high of 13.53% in June of 2012 and a record low of 0.00% in March of 2004.
Similarly, the rate of Ngultrum (BTN) against the US Dollar (USD) is forecasted to shoot up with a USD costing as high as BTN 85.38 by the end of the last quarter of 2024. The current rate is BTN 83.25.
Meanwhile, economic growth in the South Asian Region (SAR) is expected to edge slightly lower to a robust 5.6% pace in 2024, and then strengthen to 5.9% in the following year, according to the WB report.
The growth is mainly attributed with the pickup in external demand and domestic demand, including public consumption, while the report also stated that the investment will also contribute to the major drivers of economic growth.
The WB also projected India to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow, with estimated growth of 6.3% in FY 2023-2024 which is from April 2023 to March 2024. The growth in India is then expected to recover gradually, edging up to 6.4% in FY 2024-2025 and 6.5% in FY 2025-2026.
According to the WB’s report, the economic will be dampen due to the number of SAR economies, including countries like Bangladesh, Bhutan, India, Maldives, and Pakistan with the parliamentary or national assembly elections scheduled or planned in 2024.
“The heightened uncertainty around these elections could dampen activity in the private sector, including foreign investment,” the report stated.
In addition, the report also stated that if combined with political or social unrest and elevated violence, it could further disrupt and weaken economic growth particularly in countries with the weak fiscal positions; an increase in spending prior to these elections could exacerbate macro-fiscal vulnerabilities.
However, the report stated that the implementation of policies to reduce uncertainty and strengthen growth potential after elections could lead to an improvement in prospects.
Meanwhile, the Ministry of Finance (MoF) has estimated Nu 30 Billion (B) for capital expenditure and Nu 48.48B for recurrent expenditure, with the fiscal deficit maintained at 3% of the GDP corresponding to Nu 9.8B for the 13th five year plan (FYP).
Sherab Dorji from Thimphu