Bhutan Economy

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Bhutan Economy

Economy - overview: The economy of Bhutan, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for 90% of the population and account for about 40% of GDP. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are key resources. The Bhutanese Government has made some progress in expanding the nation's productive base and improving social welfare. Model education, social, and environment programs in Bhutan are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. Detailed controls and uncertain policies in such areas as industrial licensing, trade, labor, and finance continue to hamper foreign investment.

In 2004, Bhutan became the first country in the world to ban smoking and the selling of Tobacco.

GDP: purchasing power parity - $2.1 billion (1999 est.)
GDP - real growth rate: 7% (1999 est.)
GDP - per capita: purchasing power parity - $1,060 (1999 est.)
GDP - composition by sector
agriculture: 38%
industry: 37%
services: 25% (1998)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 9% (1998)

Labor force: NA
note: massive lack of skilled labor

Labor force - by occupation: agriculture 93%, services 5%, industry and commerce 2%
Unemployment rate: NA%

Budget:
revenues: $146 million
expenditures: $152 million, including capital expenditures of $NA (FY95/96 est.)

note: the government of India finances nearly three-fifths of Bhutan's budget expenditures
Industries: cement, wood products, processed fruits, alcoholic beverages, calcium carbide
Industrial production growth rate: 9.3% (1996 est.)
Electricity - production: 1,788 GWh (1998)

Electricity - production by source:
fossil fuel: 0.39%
hydro: 99.61%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 345 GWh (1998)

Electricity - exports: 1,339 GWh
note: exports electricity to India (1998)

Electricity - imports: 21 GWh (1998)

Agriculture - products: rice, corn, root crops, citrus, foodgrains; dairy products, eggs
Exports: $111 million (f.o.b., 1998)
Exports - commodities: cardamom, gypsum, timber, handicrafts, cement, fruit, electricity (to India), precious stones, spices
Exports - partners: India 94%, Bangladesh
Imports: $136 million (c.i.f., 1998)
Imports - commodities: fuel and lubricants, grain, machinery and parts, vehicles, fabrics, rice
Imports - partners: India 77%, Japan, United Kingdom, Germany, United States
Debt - external: $120 million (1998)
Economic aid - recipient: $73.8 million (1995)
Currency: 1 ngultrum (Nu) = 100 chetrum; note - Indian currency is also legal tender
Exchange rates: ngultrum (Nu) per US$1 - 43.552 (January 2000), 43.055 (1999), 41.259 (1998), 36.313 (1997), 35.433 (1996), 32.427 (1995); note - the Bhutanese ngultrum is at par with the Indian rupee
Fiscal year: 1 July - 30 June

Articles
Power & construction drive Bhutan’s economy
Posted on Monday, February 28 @ 16:27:40 CST BST

28 February 2005- The Bhutanese economy saw an estimated GDP growth of 6.8 percent in 2003-2004 but fell short of the target by one percent.
Activities in trade, power, manufacturing, and increase in the government expenditure in the construction sector were the main forces that drove the growth, according to the National Statistical Bureau in Thimphu. The trade sector (whole sale and retail trade, restaurants and hotels) saw the highest growth in the year with 18 percent. The statistical bureau attributes it to increases in people’s income and the number of tourists which brought good business to hotels and restaurants.
About 6,300 tourists visited Bhutan in the year, with tourism industry contributing US$ 9.2 million to the government. The trade sector’s share in the GDP increased to nine percent from 8.4 in the previous year.
The power sector grew by 9.5 percent and its share in the GDP increased to 12.3 percent. The growth was largely spurred by the sale of electricity to India from power projects, with the Chhukha Hydro Power Corporation Limited contributing more than 80 percent to the export.
Total electricity export to India increased to Nu. 2.6 billion in the year. The revenue from the sale of power is, however, expected to be more with the recent rise in the export tariff from Nu. 1.5 to Nu. 2.0 a unit.
The manufacturing sector, comprising of the industries in the south like cement and carbide, grew by seven percent and its share in the GDP showed 7.4 percent.
One of the highlights of the year was the finance and real estate sector which rebounded from a growth of (-) 3.6 percent to 11 percent.
It was largely because of the increase in the incomes of the Royal Monetary Authority and financial institutions whose overseas investments in the previous years was hurt by the weak global economy.
The construction sector continues to be “very robust” since the past five years mainly because of heavy investments in projects like Tala power project, say the statistical bureau. In 2003 it registered a growth of 10 percent and its share in the GDP jumped to 22 percent from 15.6 percent in 2000.
Given the vibrant construction industry, in part fuelled by the decrease in the housing loan to 10 percent from 13 percent, the GDP of the real estate rose to a record 18 percent.
Agriculture sector is still the dominant factor in the GDP with its share of 27 percent but it’s declining. In 2003, it grew only by 1.7 percent.
According to the bureau, the structure of the Bhutanese economy has changed significantly over the years. While the share of the primary sectors like agriculture and mining to the GDP has reduced from 56 percent in 1980 to 28 percent in 2003, the share of the secondary sectors like manufacturing, energy and construction has increased from 11 percent to 41 percent for the same years, clearly indicating their emergence as important players in the modern Bhutanese economy.
By Kencho Wangdi
kencho@kuensel.com.bt
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