The tertiary sector is the highest contributor to GDP
Economy: The expansion in GDP to Nu 119.5B last year, up from Nu 105B in the previous year was accompanied by a major structural shift in the economy.
According to the national accounts statistics, primary sectors’ contribution to the GDP decreased to 16.7 percent last year from 26.8 percent in 2000. However, the share of secondary and tertiary sectors has increased to 40.5 percent and 42.7 percent respectively. In 2000, secondary sector’s contribution to GDP was 35 percent and 35.8 percent from tertiary sectors.
Primary sector mainly involves the retrieval and production of raw materials. In Bhutan’s case it comprise of crop, livestock and forestry. As the economy advances, focus of the economic activity shifts from the primary to secondary sector such as manufacturing and then to the tertiary sector, which is the service industry.
A press release from the National Statistical Bureau (NSB) stated that, of the 5.46 percent growth last year, the tertiary sector contributed 3.79 percent while manufacturing and construction added 1.35 percent.
Hotels and restaurants registered the highest growth of 17.38 percent, followed by the mining sector at 17.01 percent. Wholesale and retail trade registered a growth of 13.65 percent.
However, based on share of GDP, the wholesale and retail trade, construction and transport sector were the top three contributors.
Asian Development Bank’s report, ‘unlocking Bhutan’s potential’ published recently also highlights the structural transformation of the economy.
“With growth rate in the industrial and service sectors exceeding the economy-wide average growth rate, the agricultural sector has been steadily proportionately displaced growing at an average annual rate of 3.1 percent,” the report states. Yet, the report states that agriculture remains the major source of employment, with 62.2 percent of the labour force.
The decline in growth in agriculture has not been commensurate with the fall in the employment within the sector. This mismatch between the value added and employment in the economy, the report states, has implications on income distribution and welfare.
The report also mentioned that hydropower sector’s dominance in the Bhutanese economy has implications on the concentration and distribution of economic activities. For instance, in the industrial sector, existing industries such as construction, cement, chemicals, wood-based, and metals industries are also highly dependent on hydropower sector, exposing the economy to shocks.
However, with an average annual growth rate of 7.87 percent between 1981 and 2012, ADB highlighted that Bhutan’s growth is one of the “highest seen anywhere” over three decades.
NSB recorded 6.46 percent average annual growth rate in last five years from 2010-2014.