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How does Bhutan’s Economy Look?

Tenzin Lhaden's picture
Bhutan Economic Update





In addition to further delays in hydropower construction, the report also finds that Bhutan faces three other downside risks to growth. These are: budget financing, the potential impacts of India’s Goods and Services Tax (GST), as well as natural disasters.  

The government budget is facing a resource gap with the increasing expenditures and delays in the revenue from hydropower projects. Unless financing sources are identified and secured, resource gaps will lead to cuts in expenditures, which will negatively affect growth and development. India accounts for 80-90 percent of Bhutan’s international trade. So far, anecdotal evidences show that the introduction of India’s goods and services tax (GST) has caused disruptions in trade between the two countries owing mainly due to unclear trade regulations.

Bhutan is also vulnerable to natural disasters such as recent floods and landslides. Adverse weather also negatively affects the economy through reduced electricity generation from existing hydropower plants. How can Bhutan become even more resilient to downside risks to growth and natural disasters? 


Submitted by Abu Reza on

I visited Bhutan once, way back in 1979 under the auspices of UNCTAD, seeking to resolve transport/transit issues. A landlocked country, India has a stranglehold, limiting its growth. It looked like a modern regime of smooth transit operation through India can be organized, but transport costs are debilitating its foreign trade. Bhutan's growth could be much higher. The Policy people I talked to in New Delhi were not helpful. They consider it their bilateral issue, not according to international conventions under the UN. WB may like to intervene and help Bhutan.

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