The Bhutanese Leading the way.
The country’s economic outlook faces several downside risks, with delays in hydropower projects, unpredictable weather patterns, and global economic uncertainty emerging as major concerns.
One of the main concerns is the delay in commissioning planned hydropower plants, which could slow economic growth and worsen both fiscal and external balances.
Hydropower, the backbone of the industrial sector, is currently facing pressure from increased domestic energy demand, which has lowered net electricity exports to India. According to the report, if this trend continues, it may weaken the country’s external reserves and overall fiscal position.
Another main concern is natural hazards and shifting rainfall patterns, which is a threat to both hydropower generation and agricultural productivity, two sectors which are highly dependent on weather patterns.
Industrial growth is projected at 18.6% and agricultural growth is projected at 4.3% in 2025.
According to an official from Asian Development Bank (ADB), unpredictable weather remains a major challenge, as most of the economic activities rely on consistent weather patterns.
The official also talked about the impact of global economic unrest, stating that if tariff tensions escalate, the world could experience a global economic downturn of about 1%. Bhutan, in turn, would feel the ripple effect through GDP deceleration and rising inflation, which would in turn result in the increase in the price of commodities.
A similar trend was observed during the first Trump presidency, when increased tariffs on China disrupted global supply chains, which hit the Indian economy, and consequently affected our economy as well.
A continued slowdown in hydropower activities is identified as another major risk, given the sector’s importance to industrial growth.
In addition, a slowdown in tourist arrivals could also pose a threat. The official noted that during times of global uncertainty, such as the COVID-19 pandemic, people tend to reduce travel spending, which directly affects the tourism-driven service sector. Services are projected to expand by 4.9% in 2025, buoyed by double-digit expansion in transport, storage, hotels, and restaurants.
The main upside risk, according to the ADB, would be if tourist arrivals exceed expectations. Due to the tourism industry’s strong pass-through effects on the service sector, higher tourist numbers could positively shift the growth outlook.
Another potential boost could come from the early implementation of the 5,000 MW clean energy projects agreed upon with Tata Power of India, which, if brought forward into the forecast period, could significantly improve the growth prospects.
