Macroeconomic Trends and Policy Implications: Evidence from Bhutan
and health Macroeconomic Trends and Policy Implications: Evidence from Bhutan Mashrur Khan and Matthew Robson * 1. Introduction Bhutan has performed remarkably well with an average growth rate of 7.72 percent from 2004-2014. This growth is heavily fuelled by its strong hydropower sector, particularly the exports of hydropower, which have grown at an average rate of 18.1 percent over the same period. In recent years, hydropower capacity has been increased substantially, leading to higher exports and electricity generation in the country. In addition, the tourism sector has grown rapidly over the last decade, which largely contributed to the generation of revenue for the country. Despite these successes, the country has experienced some setbacks, particularly in recent years. The current account deficit has been on the rise, which was mainly due to increasing hydropower-related imports to facilitate the installation of new hydropower plants. In addition, rapid credit growth has led to a consumption and housing boom, which contributed to large non-hydropower related imports. Consequently, the total reserves for the country as a percentage of total external debt has declined - reducing their ability to service debt - which is concerning since their external debt as a ratio of GDP has risen to over 80 percent in 2013-14 from around 55 percent in 2007- 08. This paper focuses on the macroeconomic trends that Bhutan has experienced since the 1990s. The paper provides detailed graphs and tables on selected economic indicators, particularly on the budget, inflation and balance of payment estimates for the country. However, the data available from various sources * Department of Economics and Related Studies, University of York, York, UK We would like to extend our appreciation to Sabina Alkire, at the OPHI, for her support throughout.
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