Thimphu, May 26, 2025—Amid increasing uncertainty in the global economy, Bhutan maintains a strong growth and is projected record highest growth rate in South Asia in FY24/25, says the World Bank in its annual update, released today.
The latest Bhutan Development Update highlights the recent economic developments and outlook for the medium term, with a special focus on migration. Bhutan’s real gross domestic product (GDP) grew by 4.9 percent in FY23/24, driven by service sector, particularly tourism and related services, financing, insurance, and real estate. Strong performance in mining and quarrying helped industry growth. However, the agriculture sector grew modestly due to lower crop yields caused by increasing vulnerability to climate change, shifts in land use patterns, and wildlife-related crop damage. On the demand side, growth was prmarily driven by non-hydropower exports and consumption.
“The World Bank remains committed to helping Bhutan achieve its growth aspirations,” said Cecile Fruman, The World Bank Acting Country Director for Bhutan. “We are helping Bhutan to create more and better jobs to make it attractive for youth to remain and thrive in the country. Going forward, our program will focus on increasing private investment, building infrastructure, including new hydropower and transport connectivity, and addressing the impacts of climate change, all of which are critical for accelerating growth to attain Bhutan’s upper middle-income vision by 2029.”
The national unemployment rate has recovered to pre-COVID levels, but youth unemployment remains high at 17.7 percent in the last quarter of 2024. Record high remittances in 2024 from the expatriate Bhutanese helped rebuild foreign reserves despite low levels of foreign direct investments, which averaged only 0.3 percent of the GDP from 2021 to 2023. Fiscal deficit declined significantly from 4.7 percent of GDP in FY22/23 to 0.2 percent of GDP in FY23/24.
Bhutan has contained inflation, which declined from 7.4 percent in 2021 to 2.8 percent in 2024, driven by disinflation in non-food items. However, food inflation remained elevated, due to high food inflation in India. Given that around 70 percent of Bhutan’s imports come from India and Ngultrum is pegged to the Indian Rupee, inflationary trends in Bhutan tend to follow those in India, although with a time lag.
Real GDP is expected to accelerate in the medium term, driven by new hydropower projects. The economy is projected to accelerate to 6.6 percent in FY24/25 and further to 7.6 percent in FY25/26, with support from construction and commissioning of new hydropower plants. Non-hydropower export, service sector, and public sector investment are also projected to grow.
“To maintain its strong growth trajectory, Bhutan would need to take reform measures to address key development challenges and both domestic and external risks, arising from regional and global uncertainties and continued emigration,” said Yumeka Hirano, The World Bank Economist and lead-author of the report. “These measures include strengthening economic management, supporting key sectors for growth such as agriculture, tourism, and digital development, improving the business environment for private sector development, and enhancing environment for quality jobs.”
The sharp increase in emigration post COVID-19 pandemic created policy issues about disruptions to service delivery and a ‘brain drain’ given the profile of migrants - concentrated among Bhutan’s youth, highly skilled individuals and civil servants. In parallel, the diaspora can play a strategic role in supporting economic development in Bhutan, through short or long-term contributions of financing, expertise, and networks.
Learn More:
Download: Bhutan Development Update
Please visit: https://www.worldbank.org/en/country/bhutan
