Bhutan maintained solid growth and economic stability in the first half of this year, according to the World Bank’s Bhutan Economic Update September 2017 report.
World Bank’s resident representative, Yoichiro Ishihara, while presenting a report to the finance and other agencies said, “Lending growth rates are strong. Consumer price index, exchange rates and gross international reserves show macroeconomic stability.”
He said that lending rates from financial institutions were 14.5 percent in 2015, 17.9 percent in 2016, and 17.6 percent until May this year. The gross international reserves exceed USD 1 billion as of May this year.
However, he also said that external debt keeps increasing and there were also increase in food prices. “Bhutan is at moderate risk of debt distress.”
As of June, consumer price index (CPI) increased by 4.9 percent compared to the same month in 2016. Gross international reserves exceeded USD 1 billion, equivalent to 10 months of imports of goods and services. Exchange rates have been stable or slightly appreciating against the USD in 2017.
The resident representative said that macro economic prospects are, however, not as bright as it was six months ago. “The delays in hydropower construction cloud macro economic prospects in the coming years.”
He said that given the size and importance of hydropower projects in the economy, delays are likely to have significant negative impact on growth, revenues, and exports although the economy is still expected to expand by 6.9 percent in 2018.