But youth unemployment remains an issue
With an economic growth rate of 7.5 percent in 2017, Bhutan is the fastest growing economy in the developing Asia region, according to the Asian Development Bank (ADB).
The bank’s Asian Development Outlook 2018, states that the outlook is for continued, strong, stable growth, but the delayed completion of two large hydropower plants has postponed a sharp upturn that was forecast earlier.
This means that the country is likely to experience a similar growth projection for the next two years. In 2018, the country’s GDP is projected to grow by 7.1 percent, the second highest growth after India (7.3 percent). Indian economy is expected be the fastest growing economy in 2019 with 7.6 percent followed by Bhutan with 7.4 percent.
However, ADB observed that despite sustained economic progress, youth unemployment remains an issue of concern.
“Although Bhutan has enjoyed remarkable economic progress, growth has not brought commensurate job creation for new entrants into the labour force,” the report stated.
Besides the clichéd mismatch between the skill and job demand and preference for office jobs over manual, limited absorption capacity in the job market in the public sector, family support granted to young people while unemployed and lack of motivation to pursue financial independence are cited as factors contributing to youth unemployment.
Cottage and small industries (CSIs) employ on average almost five workers per enterprise. In 2017, such enterprises employed 92,322 workers, or over 26 percent of the labour force. The government has identified the CSI sector a potential area for generating youth employment opportunities.
Despite challenges, the service sector is expected to be the main driver of the economy as wholesale and retail businesses and tourism continue to expand. Growth in industry is forecast to be moderate because the final stages of construction will slow down at the two large hydropower plants, Punatsangchhu I and II. Industry growth will strengthen slightly in 2019 because of the expected commissioning of the Mangdechhu Hydropower Plant in September 2018, which will bolster electricity production and exports.
Agriculture, which is relatively a small sector, is expected to grow faster in 2018 than last year based on the assumption of normal weather and government efforts to introduce new crops, improve productivity, and channel additional credit to agriculture as part of its agenda for financial inclusion, the ADB report states.
Various reforms that are being undertaken to foster CSI startups through improved access to finance, programmes and institutions are also expected to bear results in the coming years.
“Because CSI development involves multiple government agencies to handle its various issues, the department of cottage and small industries under the ministry of economic affairs will need to play an active role in coordinating the implementation of the new initiatives,” the report stated.