Bhutan

Bhutan is a small, landlocked kingdom in the Himalayas between India and China, known for its stunning beauty, rich cultural heritage, and strong focus on environmental preservation. Since becoming a constitutional monarchy in 2008, Gross National Happiness is seen as the government’s overarching priority. Bhutan is one of the world’s very few carbon-negative countries and graduated from the UN’s list of Least Developed Countries in December 2023.

Abundant water resources have enabled hydropower development, driving sustainable economic growth, while revenues from hydropower exports to India, tourism and remittances have supported investments in human capital. As a result, Bhutan has made strong progress in reducing poverty, nearly eradicating extreme poverty ($3.0/day), and is already lowering the number of people living below the poverty line for upper middle-income countries ($8.3/day). In 2022, 12.4 percent of the population remained under the national poverty threshold set by Bhutan. It has connected almost all households to clean and renewable electricity, and steadily improved education and health outcomes.

Bhutan is classified as a lower-middle income country, with GDP per capita around $3,718, and shows continued improvements in non-monetary wellbeing, such as education, health, and sanitation. However, the country remains highly vulnerable to climate change while both spatial inequalities persist, with poverty rates ranging from 1.5 percent in Thimphu to 41.4 percent in Zhemgang.

Bhutan maintains strong economic and strategic ties with India, its main trading partner, aid source, and market for hydropower exports. With rising youth unemployment and outmigration, the country’s key challenges include creating better opportunities for young people and harnessing the economic potential of natural assets.

Read More

Read Less

Bhutan’s economic growth remains robust, supported by the commissioning and construction of two major hydropower plants. Bhutan’s real gross domestic product (GDP) grew rapidly at 8.1 percent in FY24/25, driven by hydropower expansion and continued recovery in services.

Industrial growth accelerated to 12.0 percent from 3.1 percent in FY23/24, supported by the commissioning of the Puna-II hydropower plant and construction of two major hydropower plants. Service sector grew by 6.7 percent, supported by a revival of tourism, although tourists remain below pre-pandemic levels. On the demand side, growth was underpinned by hydropower exports and increased private investments associated with hydropower construction. Headline inflation softened to 2.6 percent in FY24/25 from 4.3 percent in FY23/24, due to lower food inflation as linked to moderation of food inflation in India.

Fiscal deficit increased to 2.6 percent of GDP in FY24/25 from 0.2 percent in FY23/24, driven by higher capital spending. Due to lower cryptocurrency mining related imports and higher remittance ($242 million FY24/25), the current account deficit improved from 20.4 to 17.4 percent of GDP between FY23/24 and FY24/25, and gross international reserve increased to $1.1 billion, covering 7.3 months of imports, in January 2026.

Amidst rising conflict in the Middle East, real GDP growth is projected to grow robust at 7.1 percent in FY25/26 before slowing down to 6.4 percent in FY26/27, supported by new hydropower projects and continued capital investment under the 13th Five-Year Plan. Bhutan is exposed to the impact of the Middle East conflict through higher oil prices and disruptions to tourism and trade, and remittance inflow to a lesser extent.

Although the overall unemployment remains low at 3.8 percent in Q4 2025, youth unemployment remains high at 20.6 percent in the last quarter of 2025. Robust growth and remittance have delivered marked improvements in living standards over the past decade, but these gains were uneven and remain fragile amid persistent vulnerabilities and uneven inclusion.

Last updated on 28 April 2026

Read More

Read Less

Bhutan has partnered with the World Bank since 1981, IFC since 2003, and MIGA since 2014. The World Bank Group has significantly increased its engagement in Bhutan.

From an average of $43 million in financing per year between 2019 and 2024, the World Bank has an ongoing commitment of over $950 million in eight projects. This includes support across a broad range of sectors, including energy, trade maternal and child health, human capital, disaster resilience, roads, agriculture, finance and digital connectivity.

Read More

Read Less

The World Bank Group’s current Country Partnership Framework for Bhutan (FY25-29) is aligned with Bhutan’s 13th Five-Year Plan and Bhutan’s 21st Century Economic Roadmap. It is informed by extensive consultations with local stakeholders and aims to support Bhutan’s efforts to accelerate economic growth and job creation while safeguarding its cultural heritage and fragile ecosystems.

The strategy focuses on increasing private investment, enhancing climate resilience, and developing resilient infrastructure for improved connectivity. Bringing together the World Bank Group’s financing, knowledge, as well as its tools to help support private capital mobilization, the CPF targets job-rich sectors such as agribusiness, tourism, renewable natural resources, and digital and creative industries, while improving the investment climate and expanding access to finance. It also supports foundational investments in health, education, and skills development, all essential preconditions for inclusive job creation.

By building and expanding our partnerships with Royal Government of Bhutan and its citizens, the World Bank Group continues to support their goals and aspirations.

Read More

Read Less