Bhutan Economy

March 10, 2010Bhutanby EconomyWatch Content

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 Bhutan’s economy is one of the world’s smallest and least developed, and is based on select sectors, such as tourism, agriculture, forestry and hydroelectricity. Bhutan is a landlocked nation in Asia and has a rather conservative approach to modernization. Destruction of fauna has been intentionally avoided. The topography varies from plains to the Himalayan ranges.

 

Bhutan has a population of 691,141 and was for long ruled by a monarchy. Bhutan held its first democratic elections in March 2008. Its total land area is 38,394 square kilometers.

 

Although the Bhutanese economy is a fledgling one, several hydroelectric projects, supported by the government, have boosted revenues and exports. In late-2009, Bhutan signed four MOUs with India to construct four hydroelectric plants in the nation. Bhutan’s tenth five-year plan (2008-2013) aims to develop the country’s economy in the rural, regional and private sectors. The Bhutanese economy has flourished in recent times due to trade agreements with India, Bangladesh and other SAARC nations. After India, Bangladesh is Bhutan’s second largest trade partner. Bhutan is a member of the South Asian Free Trade Agreement (SAFTA) and has applied for membership of the World Trade Organization (WTO).

 

Bhutan Economy, Bhutanese Economic Profile

Agriculture and forestry provide the main means of livelihood for over 60% of the population. The economy, although aligned with India through trade links, is still underdeveloped due to the country’s rugged terrain and other geographical constraints. The industrial sector is largely dependent on cottage industries and other small scale ventures. Development projects, like highway construction, are heavily dependent on migrant Indian labor. Due to control and interference from the government, foreign investments are almost non-existent. Coupled with uncertain governmental policies in licensing, trade, finance and labor, development continues to be confined to Indian and Bangladeshi investments.

 

Bhutan’s GDP (PPP) according to the 2009 estimates is $4.34 billion and occupies the 162nd place in the global GDP (PPP) list. The country’s GDP grew by 5% in 2009, with a per-capita income (PPP) of $6,200. The agriculture sector contributes 22.3% to the country’s GDP, while the industry sector contributes 37.9% and the services sector contributes 39.8% to the GDP.

 

According to the International Monetary Fund (IMF), the Bhutanese economy has grown substantially in the past decade and its future prospects are bright. The IMF report says that the 9th five-year plan (2002-2007) achieved success in reducing poverty, increasing the national income, improving social conditions, among others, in a smoothly conducted political transition. During the ninth plan, the GDP growth averaged 9.5% due to the boost in hydroelectric-based projects. The rate of inflation was at about 5% due to the rise in food and fuel prices.

 

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