Thukten Zangpo

Bhutan’s finance ministry has adjusted its economic growth forecast for 2024 to 6.1 percent as of June this year, according to the latest Macroeconomic Situation report.

This downward revision of 0.2 percentage points from the earlier third quarter (as of March) estimate was primarily due to lower-than-anticipated tourism sector performance.

The finance ministry revised its target number of tourist arrivals for 2024 and 2025 to 150,000 and 250,000 respectively, from the third quarter estimate of 200,000 and 300,000.

Despite this, Bhutan received 75, 608 tourists as of June this year, a 47 percent increase compared to the same period last year.

A majority of 69 percent tourists were from India while the remaining 31 percent were from other countries.

For the remaining six months, the ministry expects to receive an additional 50 percent of targets during the peak tourist season, reaching the target of 150,000.

While the growth forecast for 2024 has been downgraded, the report highlights ongoing support for the economy from government fiscal policies, credit growth through the Economic Stimulus Programme, and a gradual recovery in tourism.

The economic growth in 2025 is projected to accelerate to 9.6 percent, up from the third quarter’s estimate of 8.9 percent.

The agriculture sector is expected to grow marginally by 1.5 percent in both 2024 and 2025, with livestock production rising by 2.4 percent and forestry and logging by 3.1 percent.

As of June, this year, the agriculture sector grew by 1.4 percent, less than the third quarter’s anticipated growth of 1.8 percent.

In contrast, the industry sector is forecasted to see robust growth of 7.7 percent in 2024 and 20 percent in 2025, driven by hydropower projects and the lifting of loan moratoriums.

This growth is expected to boost mining, manufacturing, electricity, and construction sectors, despite a slight decline observed in electricity and construction due to reduced energy generation and spending.

Industry sector, initially expected to decline by 4.86 percent in the third quarter update, saw a marginal decline by 0.03 percent because of improvement in the mining and quarrying and manufacturing sectors, the report stated.

The electricity and construction sectors saw a decline by 2.1 percent and 7.1 percent because of reduced energy generation and decreased spending in construction activities.

As of June’s estimate, the hydropower sector is expected to generate gross earnings of Nu 29.71 billion this year, of which 34 percent will be from domestic sales. This was higher than the third quarter estimate of Nu 27.82 billion.

The service sector is expected to grow by 5.4 percent and 4.6 percent in 2024 and 2025, respectively due to projected rebound in tourism and growth in related industries such as hotels and restaurants (20.4 percent), transport (7.4 percent), and communications (6 percent).

In 2023, the service sector saw a growth of 7.9 percent, lower than the third quarter growth estimate of 10.7 percent.

Inflation is anticipated to remain moderate due to falling global energy prices and increased credit creation.

Unemployment, particularly among youth, is expected to decrease as economic growth stimulates job creation. However, the report stated that geopolitical tensions could disrupt supply chains in commodity and financial markets.