The World Bank’s Bhutan Development Update Report November 2018 warns of several economic risks. The risks include further delay in hydro power construction, scarce donor financing, policy uncertainty and unfavourable weather patterns.
It is feared these risks would slow down Bhutan’s economic growth to less than seven per cent in 2018.
The report, launched earlier this week, states any further delays in hydropower construction will negatively affect the economy through lower exports and revenues.
Donor financing is getting scarce and limited financing sources could limit government spending and negatively affect future growth and development.
It also states the policy uncertainty after the 2018 general elections could impact growth and investment.
The adverse weather events could adversely affect the economy through lower electricity generation from existing hydropower plants and decreased tourist inflows.
The World Bank recommends speeding up of developmental activities to accelerate the country’s economic growth post elections.
“As the new government kicks in, I see a lot of opportunities. The key issue is how to materialize the great ambitions into policy actions,” Yoichiro Ishihara, the Resident Representative of the World Bank Country Office, said.
“Getting used to the situation quickly, formulating policy and strategy and starting implementation will present a great opportunity to leap frog from where Bhutan is now. And this is the beauty of being a small country. For big countries, it is not really easy to formulate reform process itself. Even if that’s done, it’s very difficult to implement.”
The report states the government needs to revise the 2018-19 Financial Year budget and endorse the 12th Five Year Plan at the earliest.
“Now we are in the middle of 2018 budget but this year’s budget has not been fully approved. It is important to discuss and approve new budget because in Bhutan public sector plays a very important role in the economy and if the budget formulation process is delayed, it will have negative impacts on the economy,” Yoichiro Ishihara said.
“An equally important thing is the 12th Five Year Plan and we all understand the draft budget is to be discussed during the winter session. If it gets delayed and the implementation will be delayed, which will negatively impact not only the economic situation but also development process in general.”
Ensuring a vibrant, job-creating private sector also remains a long term challenge as per the report.
The World Bank projects an average six per cent economic growth annually over the next few years. The growth will be largely driven by ongoing hydropower projects and the services sector with tourism expected to be the driving force.