{
  "title": "IMF Executive Board Concludes 2016 Article IV Consultation with Bhutan",
  "publication": "IMF News, June 29, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2016/07/06/17/05/pr16313-bhutan-imf-executive-board-concludes-2016-article-iv-consultation",
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  "summary": "GDP per capita more than doubled during 2004-2014, rising from $1,108 to $2,612.",
  "publishDate": "2016-06-29",
  "sections": [
    {
      "heading": "Macroeconomic developments and recent performance",
      "content": "- GDP per capita more than doubled during 2004-2014, rising from $1,108 to $2,612.\n- GDP growth:\n  - Slowed to below 4 percent in Fiscal Year (FY) 2012/13 and FY2013/14.\n  - Estimated to have picked up to 5.2 percent in FY2014/15.\n  - Projected to reach 6 percent in FY2015/16.\n  - Projected to accelerate to 6.4 percent in FY2016/17 and to over 11 percent in FY2017/18, supported by hydropower construction and commissioning of new hydropower plants and solid growth in domestic services.\n- Inflation:\n  - Decelerated from 11.3 percent in Q4 2013 to below 3 percent in Q1 2016.\n  - Projected to return to about 5 percent.\n- Credit and liquidity:\n  - Growth in credit to the private sector picked up following the rupee shortage crisis of 2012-13.\n  - Monetary policy stance considered broadly appropriate with recent tightening.\n- Fiscal position:\n  - Fiscal balance switched from a deficit of 4.2 percent in FY 2012/13 to a surplus of 3.8 percent in FY2013/14, and 1.5 percent of GDP in FY2014/15 (reflecting mainly lower capital spending in early years of the 11th Five Year Plan).\n  - Reflecting accelerated capital spending in the final years of the 11th Five-Year Plan, fiscal balance is projected to turn to a moderate deficit in FY2016/17.\n- External sector and reserves:\n  - Current account deficits have been approaching record high levels in recent years, reflecting hydropower investment; these deficits were financed by robust aid inflows.\n  - Overall balance of payments remained generally positive, allowing accumulation of international reserves.\n  - Increase in hydropower generation capacity will boost electricity exports and is projected to reduce the current account deficit from over 30 percent in FY2016/17 to around 5 percent in FY2020/21."
    },
    {
      "heading": "Risks and vulnerabilities",
      "content": "- High public external debt, largely reflecting hydropower sector developments, constitutes a major risk.\n- Managing projected large hydropower-related revenues is critical; if not properly managed, the large pickup in hydropower exports and the projected increase in export earnings and budget revenues could:\n  - Undermine macroeconomic stability.\n  - Undermine competitiveness.\n  - Result in overheating and external imbalances similar to those seen during 2012-13.\n- External spillovers:\n  - Bhutan’s growth could be adversely affected by a growth slowdown in India triggered by delays in structural reforms.\n  - The tourism industry is susceptible to adverse regional developments (example: slowdown in tourist arrivals after Nepal’s earthquake)."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors welcomed improvement in macroeconomic performance and commended economic and social gains.\n- Directors’ cautions and recommendations:\n  - Hydropower development brings opportunities but also macroeconomic challenges that need careful management to avoid overheating and imbalances.\n  - Strong efforts required to increase employment opportunities, especially for the youth, through enhanced skills and training, and economic diversification.\n  - Balance acceleration of capital spending with maintaining sound fiscal balances and macroeconomic stability.\n  - Improve tax revenue collection and limit exemptions, given expected gradual phasing out of donor assistance and the need for higher social spending.\n  - Introduce a modern goods and service tax and ensure timely implementation by 2018.\n  - Closely monitor liquidity, credit and inflation; stand ready to adjust monetary policy as needed.\n  - Further improve the liquidity management system.\n  - Maintain the exchange rate peg to the Indian rupee as an appropriate nominal anchor given close economic ties with India, while noting the ngultrum is moderately overvalued; emphasize that macroeconomic stability and improvements in the business climate and competitiveness are essential to support the peg.\n  - Strengthen reserve management and improve the composition of reserves to better align with the structure of external debt and trade flows.\n  - Continue to strengthen macroprudential regulation and supervision; fill remaining regulatory gaps, including regulation of nonbank financial institutions.\n  - Encourage elimination of exchange rate restrictions as soon as macroeconomic conditions allow."
    },
    {
      "heading": "Key statistics and projections (selected)",
      "content": "- Real GDP at market prices (percent change):\n  - 2012/13: 3.6\n  - 2013/14: 3.8\n  - 2014/15: 5.2\n  - 2015/16: 6.0\n  - 2016/17: 6.4\n  - 2017/18: 11.3\n- Consumer prices (percent change, period average):\n  - 2012/13: 10.0\n  - 2013/14: 4.4\n  - 2014/15: 4.6\n  - 2015/16: 5.1\n- General government (In percent of GDP):\n  - Total revenue and grants:\n    - 2012/13: 30.2\n    - 2013/14: 33.6\n    - 2014/15: 28.9\n    - 2015/16: 31.5\n    - 2016/17: 27.2\n    - 2017/18: 27.3\n  - Tax revenue:\n    - 2012/13: 15.2\n    - 2013/14: 14.4\n    - 2014/15: 14.7\n    - 2015/16: 13.2\n    - 2016/17: 12.6\n  - Foreign grants:\n    - 2012/13: 9.4\n    - 2013/14: 12.7\n    - 2014/15: 8.0\n    - 2015/16: 12.3\n    - 2016/17: 9.0\n    - 2017/18: 10.2\n  - Total expenditure and net lending:\n    - 2012/13: 34.4\n    - 2013/14: 29.8\n    - 2014/15: 27.4\n    - 2015/16: 30.9\n    - 2016/17: 28.4\n    - 2017/18: 26.6\n  - Current balance (excluding grants):\n    - 2012/13: 3.0\n    - 2013/14: 4.7\n    - 2014/15: 3.3\n    - 2015/16: 1.6\n    - 2016/17: 1.4\n    - 2017/18: 1.1\n  - Overall balance:\n    - 2012/13: -4.2\n    - 2013/14: 1.5\n    - 2014/15: 0.6\n    - 2015/16: -1.2\n    - 2016/17: 0.7\n- Public sector debt (percent of GDP, public and publicly guaranteed, including loans for hydropower projects):\n  - 2012/13: 99.9\n  - 2013/14: 96.4\n  - 2014/15: 96.5\n  - 2015/16: 105.5\n  - 2016/17: 113.6\n  - 2017/18: 112.7\n- External sector (in millions of dollars unless otherwise indicated):\n  - Current account balance:\n    - 2012/13: -470\n    - 2013/14: -483\n    - 2014/15: -581\n    - 2015/16: -579\n    - 2016/17: -708\n    - 2017/18: -528\n  - Trade balance:\n    - 2012/13: -377\n    - 2013/14: -393\n    - 2014/15: -419\n    - 2015/16: -550\n    - 2016/17: -630\n    - 2017/18: -474\n  - Exports (goods):\n    - 2012/13: 546\n    - 2013/14: 535\n    - 2014/15: 578\n    - 2015/16: 556\n    - 2016/17: 579\n    - 2017/18: 751\n  - Of which: Electricity exports (goods, in millions of dollars):\n    - 2012/13: 188\n    - 2013/14: 167\n    - 2014/15: 181\n    - 2015/16: 192\n    - 2016/17: 180\n    - 2017/18: 315\n  - Imports (goods):\n    - 2012/13: -923\n    - 2013/14: -928\n    - 2014/15: -998\n    - 2015/16: -1,107\n    - 2016/17: -1,177\n    - 2017/18: -1,174\n  - Grants (current transfer):\n    - 2012/13: 86\n    - 2013/14: 63\n    - 2014/15: 77\n    - 2015/16: 111\n    - 2016/17: 88\n    - 2017/18: 113\n  - Capital and financial account balance:\n    - 2012/13: 557\n    - 2013/14: 638\n    - 2014/15: 633\n    - 2015/16: 762\n    - 2016/17: 724\n    - 2017/18: 787\n  - Gross official reserves:\n    - 2012/13: 917\n    - 2013/14: 982\n    - 2014/15: 958\n    - 2015/16: 1,141\n    - 2016/17: 1,157\n    - 2017/18: 1,417\n  - External debt (in percent of GDP):\n    - 2012/13: 94.1\n    - 2013/14: 93.6\n    - 2014/15: 94.5\n    - 2015/16: 105.8\n    - 2016/17: 113.0\n    - 2017/18: 110.7\n- Memorandum items:\n  - GDP at market prices (in millions of U.S. dollars):\n    - 2012/13: 1848.7\n    - 2013/14: 1829.6\n    - 2014/15: 2017.1\n    - 2015/16: 2084.8\n    - 2016/17: 2251.1\n    - 2017/18: 2549.5\n  - Electricity exports (in percent of total goods exports):\n    - 2012/13: 34.5\n    - 2013/14: 31.2\n    - 2014/15: 31.4\n    - 2015/16: 34.6\n    - 2016/17: 42.0\n  - Unemployment rate (in percent) (calendar year basis):\n    - 2012/13 (2012): 2.1\n    - 2013/14 (2013): 2.9\n    - 2014/15 (2014): 2.6\n\nPress Release No. 16/313 — IMF Communications Department, June 29, 2016.\n\n---\n\n\n References\n\n- Bhutan and the IMF\n- India and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2016/07/06/17/05/pr16313-bhutan-imf-executive-board-concludes-2016-article-iv-consultation"
    }
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    "Published: June 29, 2016",
    "GDP per capita more than doubled during 2004-2014, rising from $1,108 to $2,612.",
    "GDP growth:",
    "Inflation:",
    "Credit and liquidity:",
    "Fiscal position:",
    "External sector and reserves:",
    "High public external debt, largely reflecting hydropower sector developments, constitutes a major risk.",
    "Managing projected large hydropower-related revenues is critical; if not properly managed, the large pickup in hydropower exports and the projected increase in export earnings and budget revenues could:",
    "External spillovers:",
    "Directors welcomed improvement in macroeconomic performance and commended economic and social gains.",
    "Directors’ cautions and recommendations:",
    "Real GDP at market prices (percent change):",
    "Consumer prices (percent change, period average):",
    "General government (In percent of GDP):",
    "Public sector debt (percent of GDP, public and publicly guaranteed, including loans for hydropower projects):",
    "External sector (in millions of dollars unless otherwise indicated):",
    "Memorandum items:",
    "[Bhutan and the IMF](http://www.imf.org/external/country/BTN/index.htm)",
    "[India and the IMF](http://www.imf.org/external/country/IND/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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