Economy: The International Monetary Fund (IMF) has forecasted Bhutan to be the third fastest growing economy in the world for two consecutive years.

The IMF’s World Economic Outlook, projects the country’s real GDP to grow at 8.4 percent this year. This is the third highest projection after Myanmar at 8.6 percent and the Ivory Coast at 8.4 percent.

Real GDP is a macroeconomic measure of the value of economic output adjusted for inflation. Price change is not adjusted for nominal GDP.

Between 1998 and 2007, the country’s economy has grown at an average rate of 7.7 percent. As per the IMF data, Bhutan experienced an all time high growth of 10.8 percent in 2008.

Even in 2017, the IMF has projected Bhutan’s GDP growth at 8.6 percent, third highest after Libya (12.2 percent) and Yemen (11.9 percent).

The country’s real GDP in 2021 is projected to drop to 7.5 percent. Mozambique, in 2021 would be the fastest growing economy with growth rate of 38.9 percent. This would be followed by India with 7.8 percent growth and Myanmar with 7.7 percent. Bhutan is projected to be the fourth fastest growing economy in 2021.

The baseline projection for global growth in 2016 is a modest 3.2 percent. The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies.

“But uncertainty has increased, and risks of weaker growth scenarios are becoming more tangible,” the report stated. “In emerging markets and developing economies, policy makers should reduce macro-economic and financial vulnerabilities and rebuild resilience.”

“At a time when the global economy is failing, Bhutan’s bright outlook calls for a celebration,” the Prime Minister Tshering Tobgay said during the meet-the-press session on June 3.

The IMF report, however, classified Bhutan as a net debtor country. A nation with a cumulative balance of payments deficit is called a debtor nation. A debtor nation has negative net investment after recording all of the financial transactions it has completed worldwide.

The country’s current account balance worsened since 2011 when the country ran a negative balance of 23.5 percent of GDP. This plummeted to 26.7 percent in 2015.

However, the projection is such that after running a negative current account of 24.5 percent this year and 26.1 percent of GDP in 2017, it is projected to improve substantially to negative 4.5 percent.

A local economist said this improvement on the current account could be because of commissioning of the three mega hydropower projects. Electricity exports, he said is expected to more than double in a few years time.

The high growth rate in 2016 and 2017, he said also could be due to the gaining momentum of the on-going hydropower constructions coupled with new projects being initiated.

The IMF report, he said has a few limitations and assumptions that makes the data not too accurate. For instance a fixed exchange rate is taken into account. The data of the base year and reference period of data must also be explored to get the real picture, he said.

In terms of current account, Bhutan is projected to run the fourth highest negative balance. However, countries like Libya and Tavalu would be running a deficit as high as 57 percent and 45 percent of GDP respectively.

The country’s inflation is projected to remain below 4 percent until 2021.

Tshering Dorji