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Bhutan: Critical Development Constraints

Publication | August 2013
Bhutan: Critical Development Constraints

This report identifies the most critical constraints facing Bhutan's economy and discusses policy options to assist the government in its endeavor to achieve strong, balanced, and resilient growth that is also inclusive.

Bhutan's remarkable economic transformation has dramatically reduced poverty and improved the people's welfare. However, growth that is primarily driven by the externally funded, capital intensive, hydropower sector has been highly cyclical and vulnerable to external shocks, and unable to create adequate jobs for the growing youth population.

Moving forward, Bhutan needs to chart its course of economic development that will generate more broad-based, sustainable, and inclusive growth.


This study aims to provide support for the Government of Bhutan in its preparations for the Eleventh Five-Year Plan by identifying the critical constraints to achieving the desired growth. The foregoing policy recommendations have been suggested to assist the government in overcoming the constraints to growth and poverty-inequality reduction, and addressing the bottlenecks to sustainable and inclusive development.

The study also proposes some potential drivers that the government may wish to consider while drafting its forthcoming blueprint to achieving "a green and self-reliant economy sustained by an IT enabled knowledge society guided by the philosophy of Gross National Happiness."

New drivers of growth have been identified on the basis of their potential to escalate, diversify, and broaden the sources of growth. Appropriate policy recommendations are suggested to resolve any remaining issues regarding the growth drivers and, subsequently, direct them to their full potential and contribution to the economy.


  • Highlights
  • Development Performance
  • Critical Constraints to Bhutan's Growth
  • Critical Constraints to Reducing Poverty and Inequality
  • Drivers of Inclusive Growth for Bhutan
  • Policy Recommendations
  • References