Projections from the Ministry of Finance (MoF) say that Bhutan’s economy is projected to grow by 8.93% in 2025, nearly doubling from the 2024 estimate of 4.97%. According to the Ministry’s latest report, the surge is primarily attributed to the commissioning of the Punatsangchhu Hydroelectric Project (PHP-II) and increased investments in new hydropower constructions, including Khorlochhu and Dorjilung.
The Ministry expects substantial growth in the electricity sector, with an upward revision in PHP-II’s generation capacity, while the construction sector will remain a key economic driver in the near term.
Agricultural growth is projected to stay at 1.5% in 2024 and 2025 due to low productivity, limited commercial farming, and slow technological adoption.
The report notes that the Economic Stimulus Plan (ESP) has yet to show significant impact due to slow disbursements and production cycles.
The industry sector is set to expand, reaching 19.48% growth in 2025, though mining and quarrying projections have been lowered due to weaker-than-expected mineral exports in 2024.
The service sector is expected to grow but slow slightly to 4.34% in 2025, driven by tourism recovery.
Medium-term growth is projected at 6.3%, just below India’s 6.7%. However, Bhutan’s long-term outlook could be reshaped by the $100 billion Gelephu Mindfulness City (GMC) project—30 times the country’s GDP—aimed at creating economic opportunities, enhancing regional connectivity, fostering innovation, and promoting mindful living.
GMC offers hope for Bhutanese at home and abroad, but overall growth will depend on global economic trends.
According to the report, the current estimates show that a global oil price fluctuation alone can have a significant impact on the growth outlook by impacting the economic activity, highlighting the economy’s vulnerability to the external economic, financial, and commodity market fluctuations.
Regional Economic Outlook
The Asia-Pacific region is projected to grow by 4.4% in 2025, contributing 60% to global growth, driven by easing monetary conditions and rising private demand (IMF, 2024).
South Asia’s growth is expected to average 6.2% in 2025 and 2026, fueled by India’s resilient economy. India recorded over 7% growth for a third consecutive year, supported by strong consumption and investment demand. However, the World Bank projects a slowdown to 6.5% in FY 2024/25 from 8.2% in FY 2023/24 due to weaker investment and manufacturing. Domestic forecasts estimate 6.4% growth in FY 2025/26, driven by agriculture and services, keeping India among the fastest-growing major economies.
Bangladesh’s growth slowed to 5.0% in FY 2023/24 and rising prices. Pakistan and Sri Lanka saw a positive turnaround from improved agriculture and industrial production amid political stability. Nepal grew by 3.9% in FY 2023/24, benefiting from higher hydropower output and strong tourism.
Macroeconomic Outlook
The IMF projects global growth at 3.3% in 2025 and 2026, slightly improving from 3.2% in 2024 but still below the 2000–2019 average of 3.7%.
Advanced economies will expand moderately, with the US leading at 2.7% in 2025 due to a strong labor market and stable monetary policy, while the Eurozone lags at 1.0% amid political and economic uncertainty. Emerging markets will sustain stable growth, with China at 4.6% and India at 6.5%. The World Bank forecasts South Asia to grow by 6.2% in 2025 and 2026, largely driven by India’s infrastructure investments and economic momentum.
Sherab Dorji from Thimphu
