Bhutan social and cultural contexts9/25/2023 ![]() ![]() Annual real GDP growth averaged 7.5 percent since the 1980s, driven by the public sector-led hydropower sector and strong performance in services, including tourism. Rapid economic growth in Bhutan has contributed to substantial poverty reduction over the last two decades. In addition to continued global uncertainties and additional delays in hydro projects, downside risks to the growth outlook include delays in fiscal consolidation and financial sector vulnerabilities, which constrain the government’s ability to support a robust recovery.īhutan is a lower-middle income country. Labor shortages during the pandemic resulted in significant delays in hydro projects and hence expected delays in additional hydro revenue flows, constraining the country’s ability to strengthen fiscal and external balances in the medium term. Vulnerabilities in the financial sector with high non-performing loan (NPL) levels have increased fiscal risks, given that about 60 percent of assets of the sector are controlled by the public sector. International reserves have declined rapidly due to an increase in imports. The youth unemployment rate increased from 20.9 percent in 2021 to 29 percent in 2022, which contributed to an increase in outward migration.ĬOVID-19 relief measures and subdued revenue performance have resulted in high fiscal deficits and public debt since FY20/21, with limited fiscal space to absorb additional shocks. Tourism has been slow to recover, in part due to the new tourism levy act which tripled the sustainable development fee for international tourists from US$65 to US$200 per night. After the economy contracted for two consecutive years in FY19/20 and FY20/21, non-hydro industry and services sector activity have picked up. ![]() The COVID-19 pandemic and spillovers from the war in Ukraine have resulted in a significant deterioration in the macroeconomic situation. Bhutan has made tremendous progress in reducing extreme poverty and promoting gender equality, with continuing efforts to address social inequality issues and regional disparities. This has led to significant improvements in service delivery, education and health outcomes. Fiscal revenues from selling surplus hydropower to India and tourism have helped the country invest substantially in human capital development. Abundant water resources in the valleys create ideal conditions to tap renewal energy sources with hydropower development which has spurred economic growth with quasi universal access to low-cost electricity. The country is known for its unique philosophy – Gross National Happiness (GNH) – which guides its development strategy. Since Bhutan shifted to a democratic constitutional monarchy in 2008, the country has embarked on a development strategy founded on the principle of Gross National Happiness. A small, landlocked country nestled deep in the Himalayas between India and China, Bhutan is characterized by steep mountains and deep valleys, which led to scattered population settlement patterns. ![]()
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