The International Monetary Fund has projected an impressive 11 per cent growth rate for Bhutan in 2017-18 as the country has made significant economic progress in recent years.
“Growth is projected to accelerate further in the coming years, to 6.4 per cent in fiscal year 2016/17 and to over 11 per cent in fiscal year 2017/18, supported by hydro power construction and the commissioning of new hydro power plants, as well as solid growth in domestic services,” the International Monetary Fund (IMF) said at the conclusion of its annual consultations with Bhutan.
IMF said the increase in hydro power generation capacity will boost electricity exports, and as a result, the current account deficit will decline rapidly, from over 30 per cent in fiscal year 2016/17 to around five percent in fiscal year 2020/21.
Reflecting accelerated capital spending in the final years of the 11th Five-Year Plan, fiscal balance is projected to turn to a moderate deficit in fiscal year 2016/17 it said.
Bhutan has made significant economic progress in recent years and the GDP per capita more than doubled during 2004-2014, rising from $ 1,108 to $ 2,612, IMF said.
In a statement, the IMF Executive Directors welcomed the improvement in Bhutan’s macroeconomic performance and commended the authorities for the significant economic and social gains of recent years.
They also considered that the outlook was favorable going forward.
However, the current account deficit and external public debt remain high, mainly reflecting developments in the hydro power sector, it said.
Accordingly, Directors cautioned that while hydro power development brings opportunities, it also creates macroeconomic challenges that need to be managed carefully to avoid overheating and imbalances, IMF said.
Moreover, strong efforts are required to increase employment opportunities, especially for the youth, through enhanced skills and training, and economic diversification, the IMF said.