The Bhutanese Leading the way.
According to the monetary policy statement from the Royal Monetary Authority, the services sector is projected to grow moderately at 4.7 percent in 2025 and 4.1 percent in 2026, supported by favourable performance in the hotel and restaurant, transport, finance and insurance, and wholesale and retail trade sectors.
Tourist arrivals are expected to return to pre-pandemic levels by 2027.
Overall, the economy is expected to remain robust in the medium term, supported by a strong rebound in the performance of the hydropower, tourism, and construction sectors, along with a pickup in gross investment. Domestic economic growth is projected to rise from 6.1 percent in 2024 to 8.2 percent in 2025, before moderating to 6.8 percent in 2026 (MFCTC Update, April 2025).
These growth prospects are largely driven by the commissioning of the 1020 MW PHPA-II hydropower project, the construction of two new mega hydropower projects that are Kholongchhu and Dorjilung, the relaxation of access to banking credit, and increased government capital expenditure.
The industry sector, which currently accounts for 35.2 percent of GDP, is projected to grow significantly by 18.6 percent in 2025 and 12.5 percent in 2026, up from 8.5 percent in 2024.
This growth is supported by the performance of the electricity and water, mining and quarrying, and construction sectors, which together are expected to contribute an average of 4.2 percentage points to overall GDP growth. The hydropower commissioning and ongoing construction activities are expected to contribute over 27 percent to GDP in the near term.
In contrast, the agriculture sector is projected to slow down, from 3.6 percent in 2024 to 2 percent in 2025, and further to 1.4 percent in 2026, due to declining crop production. This is attributed to increasing climate unpredictability, erratic weather, human–wildlife conflict, low productivity, and manpower shortages. However, ongoing government efforts focused on agricultural infrastructure, value chain development, and conflict mitigation are expected to support the sector over the long term.
On the demand side, growth is anticipated to be driven by a revival of gross domestic demand, particularly through increased investment activities. Public investment is projected to rebound from -22.4 percent in 2024 to 3.9 percent in 2025 and 17.9 percent in 2026, in line with the implementation of the 13th Five Year Plan (FYP) and the government’s infrastructure priorities. Private investment is also expected to remain strong, supported by the lifting of the moratorium on housing construction and the introduction of collateral-free concessional loans under the Economic Stimulus Programme (ESP).
The labour market is expected to improve over the medium term with the continued rollout of skilling programs under the De-suung Skilling Program (DSP), job creation measures in the 13th FYP, and the gradual recovery of the private sector. Overall unemployment is projected to remain steady at 3.6 percent in 2025, before slightly declining to 3.4 percent in 2026.
