World Bank anticipates higher GDP growth rate for Bhutan
As the per World Bank report released last week it has been forecasted that South Asia is the fast growing region in the world while taking advantage of the cheap oil to reform in energy pricing .
India will definitely plan an important role due to favorable oil prices; economic growth in South Asia is expected to accelerate. The region is among the greatest global beneficiaries from cheap oil, as all countries are the net oil importers. In the last quarter of 2014 South Asia was already the fastest-growing region in the world, a World Bank report said.
According to the South Asia Economic Focus report, regional growth is projected to steadily increase from 7 percent in 2015 to 7.6 percent by 2017 through maintaining strong consumption and increasing investment. Given India’s weight in regional Gross Domestic Product (GDP), the projections reflect to a large extent India’s expected growth acceleration, driven by business-oriented reforms and improved investor sentiment.
This will definitely have a greater advantage for Bhutan as most of the food products including fossil fuel are imported from India. Deficit in current balance payments and unfavorable balance of payment with India has resulted in the slow growth of the economy. Weak private sector due to lack of finance and austerity measures taken by the government has further aggrieved the situation.
While World Bank has projected a GDP growth rate of 6.7% for the fiscal year 2015 and 5.9% for the year 2016 for Bhutan, the economic activity is expected to gain momentum mainly due to new hydro projects constructions and innovation in tourism. Further as per the World Bank report the “Visit Bhutan 2015” initiative taken to boast tourism will be a key element in determining the GDP growth rate.
However challenges like the low literacy rate, large rural population, large informal economics and poor governance are some of the challenges Bhutan faces as per the WB report. Bhutan has managed to increase the size of its financial sector over the past decade and has even managed to boost the tax ratios.
Further during the annual general meeting of the Bhutan Chamber and commerce held last week, the government has announced various measures like the ease of doing business, possible reduction in the power tariff and implementation of the national mining policy with an increase in royalty rates in all minerals will definitely provide a better growth of the economy and achieve higher GDP growth rate than that of 2.05%.