The World Bank says Bhutan’s economy will grow slower at 4 percent this year, according to its  Global Economic Prospects Report 2024.

The growth forecast has been increased by 0.9 percentage points from the World Bank’s projection last June, which was 3.1 percent. In the previous fiscal year, 2022-23, the growth was estimated to be 4.6 percent.

The Bank said that the anticipated slowdown in growth for this fiscal year is due to decreases in public investment and capital spending. However, the economy will gain from the strong performance in tourism-related services.

Global tourism’s recovery has been a boon for Bhutan, with 103,000 tourist arrivals last year, surpassing the Department of Tourism’s target of 98,000 tourists for the year. During the same period, Bhutan also earned a record revenue of USD 26 million from the sustainable development fee.

In the upcoming fiscal year 2024-25, the Bank expects the economy to rebound to 4.6 percent growth. This is due to the recovery in industrial and service sectors, as well as the commissioning of a new hydroelectric plant, the Punatsangchhu-II plant, by the end of the year.

This growth forecast is 0.3 percentage points higher than the Bank’s projection last June.

According to the Asian Development Bank (ADB) December 2023 report, Bhutan’s economy is expected to grown to 4.4 percent this year. This growth is attributed to the recovery in the tourism industry and the commencement of operations at the Nikachhu power plant.

However, the ADB mentioned that last year’s growth projection of 4.3 percent was slightly reduced due to adverse weather conditions affecting crop production and hydropower generation.

Last year, Bhutan’s hydropower generation decreased by 2 percent compared to the previous year. The total electricity generated was 10,534.81 million units (MU) last year, which is 218.09 MU less than the 10,749.63 MU generated in 2022.

Presently, the construction sector is facing challenges due to the suspension of credit for commercial housing and hotel projects in June last year. This suspension was intended to tackle non-performing loans and preserve foreign exchange reserves.

The World Bank has projected an economic growth rate of 6.3 percent for India in the fiscal year 2023-24, and 6.4 percent for the fiscal year 2024-25.

During the same period, the economy of Bangladesh is expected to grow by 5.6 percent and 5.8 percent. Nepal’s growth is projected at 3.9 percent, while Pakistan’s growth is forecasted at 1.7 percent for the fiscal year 2023-24.

The global economy is expected to slow down for the third consecutive year, decreasing from 2.6 percent growth last year to 2.4 percent this year.

Developing economies are projected to grow at a rate of 3.9 percent, compared to 1.5 percent growth last year for advanced economies, which are forecasted to grow at 1.2 percent this year.