Thukten Zangpo 

Financial support, human capital development, and social inclusiveness would be key areas for Bhutan to become a high-income country, Asian Development Bank’s (ADB) Vice President of South Asia Regional Department, Shixin Chen said yesterday.

The government plans the country’s gross domestic product (GDP) to double to USD 5 billion (B) by 2029 and USD 10B by 2034. According to ADB, Bhutan’s GDP was USD 2.6B in 2022.

For Bhutan to achieve the USD 10B economy, the country should have a real GDP growth rate of 11.7 percent annually, an official from ADB said. Between 2011 to 2019, Bhutan saw an average growth rate of 5.4 percent.

“Bhutan’s economy is on the right track towards recovery,” Shixin Chen said, adding that after seeing a huge contraction because of Covid-19 crisis.

He said that Bhutan’s GDP is projected to grow at 4.7 percent this year and 4.6 percent next year.

Shixin Chen said that as Bhutan works on the 13th Plan, the ADB’s current portfolio and pipeline are strongly aligned with the plan’s priorities. The pipeline includes skills development and green energy investments. ADB is currently working on the country partnership strategy 2024-28 which is a perfect fit for the 13th Plan.

“The next five years would be a critical period for Bhutan since it will give direction on how the country will move forward for a long-term goal, aiming for a high-income country by 2034,” he said. “The government has a strong commitment to economic and social development for the medium and long term.”

However, Shixin Chen said that the government should focus on investment in the priority sectors which will generate more productivity, revenue, and efficiency.

He also said that human capital development in social, health, and education, skills development including vocational training, investment in the energy sector (hydropower) and private sector, solar and wind under public-private partnership would be important.

“Solar and wind energy has the potential to offset the country’s electricity imports during winter,” Shixin Chen said.

He added that Bhutan’s unique advantages–rich culture, great people and hospitality, and natural beauty would be an asset for tourist attraction.

At the same time, Shixin Chen said that the ADB will support agro-business, human capital development, water and sanitation, foreign direct investments, and urban development along with regional cooperation and integration.

Sharing his concerns about many Bhutanese leaving abroad for work and study, he said that skilled and talented people are key to economic growth and it would be challenging without them.

However, Shixin Chen said there has to be a comprehensive approach to retain and attract talent in the country by creating more opportunities for private sector investment and skill training considering short-term, medium-term, and long-term.

He also said that Bhutan’s elevated fiscal deficit of 9 percent in 2022 is not under distress but controllable as huge money was spent to respond to Covid-19.

Shixin Chen added that Bhutan could generate more revenue and tax as the economy recovers.

According to the ADB, Bhutan’s fiscal deficit remains elevated at around 9 percent in 2022, higher than the average of 2 percent in the five years prior to Covid-19.

The government can release the pressure on the fiscal deficit by looking at revenue generation from investment in productive areas, structural reforms, and growth in tax revenue from 13 percent in 2022 to above 15 percent, Shixin Chen said.

 Photo: ADB’s Vice President, South Asia Regional Department, Shixin Chen (middle) shares his opinion on Bhutanese economy