The World Bank published a Bhutan Development Update projecting that Bhutan will sustain strong medium-term growth driven by hydropower, while warning that youth unemployment, emigration and higher fuel prices linked to the conflict in the Middle East are key constraints on translating growth into jobs and higher household living standards. Real GDP is projected to grow by 7.1% in FY25/26 and 6.4% in FY26/27, supported by the full commissioning of the Punatsangchhu-II Hydroelectric Project and ongoing construction of the Dorjilung and Khorlochhu hydropower plants. The national poverty rate is expected to fall to 5.1% in 2026 and 4.5% in 2027, while inflation is projected to rise to 5.2% in FY25/26 and 5.6% in FY26/27 on higher food and fuel prices. International reserves are expected to improve to about USD 1.3 billion, around seven months of imports, but the current account deficit is projected to remain elevated at around 20% of GDP due to hydropower-related imports; risks highlighted include hydropower delays, weaker-than-expected fiscal consolidation, financial sector instability and higher fuel prices. The report also assesses employment potential in the agrifood system, which employs about 55% of Bhutan’s employed population, and finds that shifting labour from on-farm work to logistics, processing and food services could raise earnings by up to 33%, contingent on investment in skills and infrastructure, stronger food safety compliance, and reforms to agricultural subsidies and finance.
World Bank 2026-04-09
World Bank’s Bhutan Development Update forecasts 7.1% real GDP growth in FY25/26 and highlights youth unemployment and oil price pressures
The World Bank’s Bhutan Development Update projects robust medium-term growth driven by hydropower, with real GDP forecast to expand by 7.1% in FY25/26 and 6.4% in FY26/27, alongside declining poverty but rising inflation. International reserves are expected to strengthen to about USD 1.3 billion, while the current account deficit remains high at around 20% of GDP and risks stem from hydropower delays, weaker fiscal consolidation, financial sector instability and higher fuel prices. The report highlights that shifting labour within the agrifood system from on-farm work to logistics, processing and food services could increase earnings by up to 33%.