…slightly higher than ADB and WB’s forecast 

Thukten Zangpo

The International Monetary Fund (IMF) expects Bhutan’s economy to expand from 4.3 percent last year to 4.7 percent in 2023.

It was an upward revision by 0.4 percentage points from its earlier forecast of 4.3 percent six months ago.

This was according to the IMF’s biannual “World Economic Outlook” released on April 11 this year. However, the IMF said that the growth is expected to slow down to 3.4 percent in 2024.

The latest IMF forecast is slightly higher than the latest Asian Development Bank’s (ADB) projection of 4.6 percent in 2023 and World Bank’s (WB) projection of 4.1 percent and 3.7 percent in the fiscal year 2022-23 and 2023-24 respectively.

The economy is expected to see growth because of better hydrological flow returning to normal after two years of decline. Also, the commissioning of the two hydropower plants Punatsangchhu-II and Nikachhu by 2024, according to the multilateral agencies’ report.

However, the recovery in tourist arrivals is expected to slow because of an increase in sustainable development fees.

Bhutan’s average consumer price inflation is seen slowing to 4.6 percent in 2023 from 6.5 percent last year, the IMF stated.

The IMF’s latest inflation rate is also lower than the ADB’s projection of 5.5 percent in 2023 and the WB’s projection of 5.9 percent in fiscal year 2022-23 before moderating at 5 percent in the fiscal year 2023-24.

The country’s current account deficit, standing at 32.1 percent of gross domestic product in 2022 is forecast to narrow to 29 percent in 2023 before slightly decreasing to 15 percent in 2024, the IMF stated.

Bhutan’s widening current account deficit and declining foreign currency reserves still remain a challenge for Bhutan.

The IMF projects the GDP of emerging and developing Asia will grow to 5.3 percent in 2023 before slowing down to 5.1 percent in 2024.

Bhutan’s major trading partner, India’s growth was slightly lowered to 5.9 percent from 6.1 percent from the earlier projection. However, the IMF said that the Indian economy was one of the bright spots in the global economy and previously underestimated the country’s performance.

The global economy is expected to expand by 2.8 percent in 2023 before rising to 3 percent in 2024 next year.

Global inflation will decrease slower than expected, from 8.7 percent in 2022 to 7 percent this year and 4.9 percent in 2024, the IMF said.

The IMF stated that the supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding.

At the same time, the massive and synchronised tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets.

Despite high inflation, rising geopolitical tensions and financial stability, the IMF predicted that most of the countries will avoid recession this year.