The Bhutanese Leading the way.
Foreign reserves are projected to reach USD 1.11 billion (bn) at the end of FY 2025–26, enough to cover 29 months of essential imports and provide a cushion against external shocks, according to the Macroeconomic situation update from the Ministry of Finance (MoF) for the fourth quarter of FY 24-25.
The economy expanded by 7.5 percent in 2024 and is expected to grow by 8.55 percent in 2025, maintaining this pace through 2027 to reach Nu 325 billion (bn) or around USD 3.8 bn. Growth is being driven by hydropower construction and commissioning, together with a rebound in services and tourism.
Tourism arrivals increased by 25 percent in the first half of 2025, bolstering trade, transport, hospitality, and the arts and crafts sector. Rising incomes and tourism spending have supported services and retail trade, while the commissioning of Punatsangchhu-II reduced electricity imports by 10.1 percent. From 2026, power exports are projected to account for up to 40 percent of electricity revenues. Construction activity is also recovering, with private investment picking up and public spending expected to rise as hydropower projects progress. Overall, unemployment is projected at 2.9 percent, and youth unemployment remains a concern.
On the fiscal side, revenue for FY 2025–26 is expected at Nu 73.2 bn, up 17.7 percent from the previous year, while expenditure is projected at Nu 119.2 bn. This results in a fiscal deficit of 5.2 percent of GDP, with measures being taken to keep it below 5 percent. Future revenues will be supported by the planned Goods and Services Tax in 2026 and income tax reforms in 2027. Public debt is estimated at 108 percent of GDP, with more than half tied to hydropower projects, though the ratio is expected to decline once the projects are commissioned.
Inflation eased to 2.1 percent year-on-year, even as price levels remained higher than a year ago. Credit growth stood at 14 percent, led by lending to tourism, manufacturing, and housing. Non-performing loans rose by 7.2 percent, prompting the Royal Monetary Authority to introduce restructuring measures.
The trade deficit widened by 12.7 percent due to high import dependency, though rising industrial output is expected to help reduce the gap.
