THIMPHU, June 24, 2025—With Bhutan’s reliance on hydropower, tourism, and agriculture, climate change poses significant risks to its economy and people, especially under dry and hot climate scenarios, with floods, landslides, extreme heat, and other hazards, disproportionately affecting vulnerable populations, says a new World Bank report launched today.
The Country Climate and Development Report (CCDR) for Bhutan recommends fostering a more diversified and resilient economy to create jobs in sustainable sectors. Without any adaptation and diversification measures, Bhutan could face significant GDP losses by 2050 under hotter and drier climate scenarios. However, investments in adaptive infrastructure, resilience, and economic diversification could reduce projected GDP losses by at least 40 percent.
“As the world’s first carbon-negative country, Bhutan is a climate leader and can pave the way for climate-smart, job-rich development,” said Cecile Fruman, Acting World Bank Country Director for Bhutan. “Bhutan is uniquely positioned to leverage its carbon-negative status and abundant natural resources to drive sustainable and diversified growth. As climate risks increase, it must prioritize adaptation and resilience across key sectors, including policy planning and infrastructure investments.”
The report shows that climate action and economic transformation can go hand in hand. To create more jobs, especially for youth, Bhutan needs new engines of growth like climate-smart agriculture, sustainable forestry, tourism, and green industry to build long-term competitiveness.
“Bhutan’s private sector has a critical role in driving the country’s economic diversification and resilience. By investing in and embedding sustainability into key sectors like tourism, forestry, and agriculture, businesses can create jobs, attract investment, and strengthen Bhutan’s participation in the global economy,” said Imad N. Fakhoury, Regional Director for South Asia, International Finance Corporation. “IFC—as part of the One World Bank Group approach, and the largest development finance institution focused on the private sector—is committed to working with key partners to unlock private capital mobilization and innovation that will accelerate this transition and support Bhutan’s development goals.”
To sustain progress, Bhutan needs to transition from concessional aid to new financing sources. Tapping into global climate funds, carbon credit markets, and private investment—while developing domestic green finance instruments and improving tax systems and budgeting for climate—will enable this transition.
Climate-smart agriculture practices can enhance resilience of the agriculture sector while improving productivity and rural incomes. Scaling up forest-based value chains and eco-tourism can create green jobs, while expanding early warning systems and social protection will help safeguard vulnerable communities.
“Our analysis shows that climate risks are real—but so are the opportunities,” said Rangeet Ghosh, World Bank Senior Economist and Lead Author of the report. “Adaptation and diversification are essential to preserve Bhutan’s progress and expanding opportunity—especially for the most vulnerable.”
Regions and districts are unevenly exposed to climate impacts and natural hazards. Poverty and hazard risks often overlap. About 65 percent of the population is exposed to at least one natural hazard. People in Zhemgang and Mongar in central and eastern regions face higher risks. Urban areas face increasing vulnerability to climate hazards, especially floods and landslides. By 2050, Bhutan's cities are expected to experience more intense rainfall, higher temperatures, and prolonged dry periods. Resilient infrastructure, climate-resilient urban planning, and nature-based solutions like watershed restoration will reduce disaster risks. Climate-informed urban planning, zoning, and digital infrastructure can protect growing urban populations. Similarly, in hydropower sector, stronger risk-informed planning and dam safety to manage increasing variability in water flows and seasonal extremes will be needed.
Bhutan can strengthen social protection systems, expand green skills development, and empower communities to take a leading role in adaptation. Integrating indigenous knowledge, improving early warning systems, and building trust will be essential to deliver impact.
The World Bank Group’s Country Climate and Development Reports (CCDRs) are new core diagnostic reports that integrate climate change and development considerations. They will help countries prioritize the most impactful actions that can reduce greenhouse gas (GHG) emissions and boost adaptation, while delivering on broader development goals. CCDRs build on data and rigorous research and identify main pathways to reduce GHG emissions and climate vulnerabilities, including the costs and challenges as well as benefits and opportunities from doing so. The reports suggest concrete, priority actions to support the low-carbon, resilient transition. As public documents, CCDRs aim to inform governments, citizens, the private sector and development partners and enable engagements with the development and climate agenda. CCDRs will feed into other core Bank Group diagnostics, country engagements and operations, and help attract funding and direct financing for high-impact climate action.
