Economy Set to Surge with Hydropower Projects & Gov Spending

Our nation is poised for significant economic growth, fueled by ambitious hydropower projects and increased government expenditure. The finance ministry’s recent projections paint a promising picture of the nation’s economic landscape for the fiscal years ahead.

According to the finance ministry’s macroeconomic situation report for the second quarter of the fiscal year 2023-24, Bhutan’s economy is slated to grow at a robust 5.68 percent this year. Looking ahead, the forecast for 2025 is even more optimistic, with an anticipated expansion of 8.97 percent. This trajectory underscores Bhutan’s emergence as a regional economic powerhouse.

One of the key drivers behind this growth is the imminent commissioning of mega hydropower projects, which are expected to significantly bolster the country’s energy sector. The Nikachhu project alone is estimated to contribute an additional 491 million units of energy, leading to earnings of Nu 29.69 billion from electricity sales this year. Furthermore, the commissioning of the Puna-II project in 2025 is projected to amplify hydro energy sales earnings by a staggering 63 percent.

Hydropower remains a cornerstone of Bhutan’s economy, serving as the primary source of foreign currency and contributing substantially to both exports and domestic revenue. Despite a slight dip in gross earnings from hydropower energy sales last year, the sector continues to play a pivotal role in driving economic growth.

However, alongside these promising developments, the finance ministry has highlighted several risks to the growth outlook. Factors such as commodity price fluctuations, financial market volatility, labor market constraints, and external sector imbalances pose challenges that must be navigated effectively to sustain economic momentum.

In response to these challenges, the government has allocated a significant portion of the budget towards capital expenditure in the 13th Plan, signaling a commitment to infrastructure development and economic diversification. With a budget 30 percent higher than the previous plan, this investment lays the groundwork for sustained growth and development across various sectors.

An analysis of sectoral growth reveals a mixed performance across different industries. While agriculture is projected to register modest growth, driven by crop and livestock production, the forestry and logging sector is expected to experience a slight decline. The industry sector, particularly electricity and construction, faces challenges due to reduced government spending and lower hydropower generation. However, mining, quarrying, and manufacturing show signs of resilience with positive growth trajectories.

In contrast, the service sector emerges as a bright spot, poised for robust expansion across various sub-sectors such as wholesale and retail trade, transport and storage, hospitality, and public administration. These segments are expected to drive overall economic growth, contributing to Bhutan’s evolving economic landscape.

As Bhutan continues its journey towards sustainable development and prosperity, leveraging its abundant natural resources and fostering a conducive investment climate will be essential. With prudent policies and strategic investments, the nation is well-positioned to harness its economic potential and chart a path towards a brighter future for its citizens.

Related Posts