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Thupten Sangpo
The country’s economic growth rate is expected to reach 8.9% next year, driven by the expected commissioning of the Pune Phase II project, improvements in the manufacturing and construction sectors, and growth in tourism and related industries.
This is according to the 2024-25 budget report.
The report also pointed out that government initiatives such as the Economic Stimulus Package (ESP) will further boost economic growth.
The economy is expected to grow 6.3% this year, up from 4.5% in 2023.
The government has allocated N97.63 billion for the 2024-25 fiscal year, the first year of the 13th Five-Year Plan. The government is yet to release the first N2.5 billion of the N15 billion Economic Stimulus Package (ESP).
“This growth is driven mainly by government investment, especially in 2025, followed by a slight increase in private investment due to the removal of loan repayment deferrals,” the report states.
It added that as the tourism industry gradually recovers, the number of international and regional tourists is expected to increase, contributing positively to economic growth.
In the agricultural sector, growth is forecast to be 1.8% in 2023, following a decline of -1.1% in 2022. Growth is expected to rebound as crop and livestock production is expected to increase..It is expected to reach 5% in 2024 and 2025.
However, the report highlights that challenges such as climate-related vulnerabilities and low productivity are hampering its growth potential.
To address these issues, the government will adopt market-related intervention measures and policies.
The industrial sector is expected to grow by 6.7% and 17.7% in 2024 and 2025, respectively.
This is mainly due to the commissioning of Puna-II, which will affect the growth rate of the power industry to 5.6% and 28.9% in 2024 and 2025 respectively.
Growth is also expected to be driven by increased activities in the mining and quarrying sectors, as well as construction. This is attributed to the lifting of bans and increased government spending on construction projects.
Increased domestic industrial electricity demand is expected to drive manufacturing growth, which is expected to increase to 8.6% in 2025 from 6.9% in 2024.
In 2023, industrial sector growth is expected to decline to -4.9%, mainly due to the contraction of the power and construction sectors by -8.3% and -7.9%, respectively.
The decline was attributed to reduced government and hydropower construction spending and unfavorable hydrological conditions.
On the other hand, mining, quarrying and manufacturing are expected to grow by 7.9% and 4.5% respectively.
On the services sector, tourism is expected to rebound sharply as the government aims to increase tourist arrivals to 200,000 and 300,000 by 2024 and 2025, respectively.
This is expected to stimulate related industries such as transportation, hospitality, and entertainment. The transportation and warehousing industries are expected to grow by 5.9% and 7.3% in 2024 and 2025, respectively.
Hotel and food service industries are expected to grow by 16.2% in 2024 and 20.7% in 2025. The outlook for entertainment, leisure and other services is positive in both 2024 and 2025, which is likely to drive the growth of the industry.
The services sector is expected to grow by 10.7% in 2023. This growth is driven by a modest recovery in tourism, which has spillover effects on various sectors such as trade, transportation, hotels and restaurants, and entertainment and leisure services.
However, the report noted that there are downside risks to this outlook as the economy is exposed to global and domestic factors. “Commodity market and exchange rate shocks could pose downside risks to Bhutan’s economy, leading to a deterioration in economic performance,” the report warned.
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