Beating Asian Development Bank (ADB), World Bank has projected Bhutan’s economic growth to be at 7.3 per cent for this year.
The government is targeting a 10 percent growth annually while ADB projects 6 percent growth.
The growth is based on the support by ongoing hydro and industrial construction and commissioning, possible lifting lift on bans on imports and housing credits and disbursement from India, which will bring in higher capital spending, economic stimulus, increased public wages and tourism expansion, the World Bank’s twice a year report, “South Asia economic focus” reads.
However, the bank projects domestic revenue would decline to 19.5 percent of the GDP this year down from 20.8 percent in 2013.
The World Bank’s report stated that Bhutan runs a large and growing current account deficit driven by hydro-sector where 85 percent of the GDP are external borrowings at the end of last fiscal year, which went up by 14 percent compared with 2012 fiscal year.
The report also said that hydro revenue would stagnate at 3.7 percent in 2014, with no new projects generating.
But should commissioning of the one more hydropower and industries take place, it would ease the fiscal deficit by 0.7 percent in the fiscal year 2015.
Inflation in 2014 and beyond will be affected by a scheduled rise in electricity tariffs of up to 30 percent while the impact on poverty should be modest, given the progressive nature of tariff.
The report on South Asian countries stated that while the region is well on track of recovering from the global economic crisis in 2008, Maldives and Bhutan are under performing mainly on the account of fiscal deficit.