Modest Growth Of 5.1% Projected For Bhutan's 12th Five Year Plan
The agriculture sector continues to be the major employment provider in Bhutan’s economy.
By Staff Reporter | The Bhutanese
According to the current assessment of Bhutan’s baseline growth forecast, a modest growth of 5.4 percent in the medium term and 5.1 percent on an average for the 12th Five Year Plan (FYP) has been projected.
A slowdown in growth is projected mainly on account of the shifting of the commercial operation date of Punatsangchu - I and II to the next plan. It is also compounded by the delay in the commissioning of the Mangdechu Hydro project and Nikachu Hydro project.
It is anticipated that a higher growth of 6 percent and above could be achieved in the 12th FYP. It can be attained by expediting the commissioning of Punatsangchu II and starting the construction of Sunkosh hydropower project within the plan period.
In addition, attracting additional Foreign Direct Investments, Public Private Partnerships and implementing major fiscal reforms such as GST can help to propel economic growth.
The service and manufacturing sectors are expected to greatly contribute to the country’s economy with a share of 48 percent and 41 percent respectively. The agricultural sector is expected to contribute 11 percent of the sector share in the 12th FYP.
Employment rate in Bhutan
The agriculture sector continues to be the major employment provider in Bhutan’s economy. It hires about 57.2 percent of the labour force, followed by the service sector at 34.2 percent and the industry sector employing 8.7 percent.
Photo: Bhutan swallow tail
The unemployment rate in 2016 was 2.1 percent which is an improvement of 0.4 percent points from 2015.
In hindsight, the adoption of policies focused in skill development in the service industry could have been an important source for generating gainful employment for Bhutanese youth.
External sector performance during the 12th FYP is likely to improve as the current account deficit is projected to fall to a single digit which will be adequately financed by surplus from capital and financial flows. Thus, the overall balance of payment is estimated to remain positive at 2.8 percent of GDP on average.
Exports are projected to increase by 1.12 percent with the commissioning of the Mangdechhu Hydropower Project while imports are also projected to increase at an average of 1 percent. However, imports will increase if the new hydropower projects are taken up.
In the 12th FYP, international reserves is estimated to increase at an average of 5.2 percent, contributed mainly by tourism sector inflow, budgetary grants and hydropower disbursements.
Tshechus (Festivals) are major highlights for tourists visiting Bhutan.
Photo: Druk Asia
The total reserves for the fiscal year 2018-19 is estimated to be at US $1,440 million, an increase by 11.2 percent from the previous year.
The total resources for the 12th FYP is estimated to be at Nu 280 billion, which is an increase of 31 percent from the previous plan. Of the total estimated resources for the 12th FYP, 85 percent comes from domestic revenue and the balance is from grants from Bhutan’s development partners.
For the fiscal year 2018-2019, the estimated resources is Nu 39 billion, which accounts for 14 percent of the total estimated resources of the 12th FYP.
Total grants estimated for the 12th FYP is Nu 63 billion which is about 22 percent of the total resources. The grants from the Government of India accounts for 71 percent of the total grants while the rest is expected from other development partners.
For the fiscal year 2018-19, the estimated grants stand at Nu 5 billion, of which Nu 3 billion is from the Government of India.
Based on the loan agreement signed for the on-going projects and requirement for financing, the estimated fiscal deficit and public debt is projected to hit Nu 249 billion by the end of the 12th FYP.
It will account for 87 percent of Bhutan’s GDP, which will be an increase of 33 percent from the previous years.
This article first appeared in The Bhutanese and has been edited for the Daily Bhutan.