Overcoming Intertwined Challenges to Reach Upper Middle Income Status in Bhutan by 2029

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Bhutan's economic growth has led to a significant decline in poverty over the past two decades, but structural transformation remains slow, with challenges in diversifying the economy beyond hydropower [6] - The new Government aims to transform Bhutan into a developed nation within five years, with a focus on reaching upper middle income status by 2029 through investments in people, economic progress, and sustainability [9] - The hydropower sector is crucial for Bhutan's economy, contributing significantly but employing less than 1% of the labor force, indicating a need for economic diversification [6][8] Summary by Sections Economic Challenges - Bhutan faces intertwined challenges, including high unemployment among youth, a failing education system, and strained healthcare services due to shortages of medical professionals [8] - The economy is in crisis, with farmlands left fallow while the government spends billions on food imports, leading to low confidence in public administration [8] Policy Recommendations - Immediate policy actions suggested include strengthening cross-sectoral coordination and public-private partnerships to enhance the renewable natural resource sector [2] - The Government should implement a health financing strategy to ensure sustainability in healthcare amidst rising costs [13] - A comprehensive financing strategy for hydropower projects is necessary, aiming to generate nearly 7,000 MW from 13 projects by 2035, requiring around USD 14 billion [17] Investment in People - Investments in quality education, healthcare, and social protection services are essential to stabilize the population and reverse emigration trends [10] - Expanding employment service centers and labor market information systems can strengthen the link between skills and private sector needs [12] Economic Progress - The private sector is envisioned as the main job creator, necessitating efficient public sector operations and infrastructure investments to connect economic centers [14] - Enhancing trade with neighboring countries through improved sanitary and phytosanitary standards and trade facilitation measures is crucial for rural entrepreneurs [16]