Bhutan: 2025 Article IV Consultation-Press Release; and Staff Report

The 2025 Article IV Consultation with Bhutan examines that growth is projected at 7.4 percent in FY2025/26 and to remain strong in FY2026/27, reflecting increases in tourism, hydropower exports and capital spending. Inflation is projected to converge toward 4 percent. The medium-term growth outlook is positive, driven by rising hydropower generation and capital spending, but risks are tilted to the downside. These include delays on hydropower projects, a global slowdown, declines in value of crypto asset holdings, fuel-price increases, and climate-related shocks. Tighter fiscal and monetary policies along with enhanced financial sector supervision are key to rebuilding buffers and safeguard macroeconomic stability. The Gelephu Mindfulness City (GMC) project has strong potential to spearhead economic diversification and spur foreign direct investment, but fiscal and financial risks must be mitigated. While the GMC aims to attract private investment and promote diversification, the legal framework governing its status versus the rest of Bhutan remains at an early stage and needs further clarity on labor, goods, and capital mobility.