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Fitch projects quick rebound for Bhutan's economy

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| May 13, 2021 1:14:38 PM IST
Fitch Solutions has revised its real GDP growth forecasts for Bhutan to minus 2.4 per cent in the calendar year 2020 and 2.9 per cent in 2021 from minus 3.5 per cent and 4.7 per cent previously.

It raised the estimate for 2020 as a sharp rise in hydropower production as a result of better rainfall and commissioning of the Mangdechhu hydropower project has likely partially mitigated the pandemic shock to tourism-related sectors like retail, hospitality and transport.

With Covid-19 cases rising in Bhutan despite high vaccination rates domestically as well as surging caseloads in neighbouring India -- Bhutan's largest source of tourists -- tourism is unlikely to restart in 2021, said Fitch.

"This will weigh on a rebound in services activity. As such, growth in 2021 will likely be supported by manufacturing, construction, and agriculture."

Hydropower production in Bhutan surged in 2020 by 31 per cent, helping to mitigate the pandemic shock on the economy. Generally, higher rainfall during the year also supported better electricity generation from all hydropower projects.

"We estimate that the electricity sector, which accounts for 13 per cent of GDP, would have driven a 4.2 percentage point increase in real GDP in 2020. This will partially mitigate the declines on tourism-related sectors," said Fitch.

Bhutan's international borders are expected to remain closed until further notice. Besides, Indian tourists account for more than 70 per cent of Bhutan's total tourist arrivals. Tourism accounts for about 4.7 per cent of GDP in Bhutan. (ANI)

 
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