Bangkok (UN Information Services) – Bhutan’s economic growth accelerated in 2007, buoyed by private investment in housing and public investment in infrastructure together with a major hydropower electric scheme coming on stream, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific, ESCAP said gross domestic product (GDP) growth “rose dramatically” to 17.6 per cent in 2007 from 5.5 per cent a year earlier as the impact of construction of infrastructure has an impact on the “rhythm of economic activity.” Growth in 2008 is expected to moderate to about 10 per cent. But ESCAP anticipates the boost to economic activity to be sustained into the foreseeable future.
“The construction of the two new hydropower projects will help to sustain real gross domestic product (GDP) over the medium term,” ESCAP said. The sale of electricity to India has led to an improvement in Bhutan’s trade balance over 2007. “The country’s current account balance turned to a surplus over the year, and is expected to remain in surplus in the near future,” ESCAP said.
ESCAP sees inflation as point of concern amid higher food prices
But ESCAP noted concerns over inflation triggered by higher oil prices and other commodities in international markets. “Food prices in general rose more rapidly, imposing extra burdens on low and fixed income groups,” it said. Inflation in Bhutan has remained around five per cent over recent years.
It warned that “very high oil prices will not only compromise economic growth but add pressures on inflation, budget and balance of payment.” ESCAP called for measures to be taken to address the problems of high oil prices and also to contain oil imports by way of selective energy conservation measures.
ESCAP, pointing to the wider issue of raising regional incomes to reduce poverty, called for attention to be focused on the agriculture sector given that 70 per cent of the poor in the Asia-Pacific region live in the rural sector.
The effort to reduce widening income gaps and reduce poverty requires the raising of agricultural labour productivity, ESCAP said. “Raising the region’s average agricultural productivity can take 218 million people out of poverty (in the Asia-Pacific region), roughly a third of the total poor in the region,” it said.
Agriculture’s revitalization key to reducing poverty
ESCAP, in a wider view of the Asia-Pacific region, said efforts to reduce poverty – especially in rural areas – required the promotion of productivity in the agriculture sector. The rural poor account for some 70 per cent of the poor in Asia and the Pacific.
“Agriculture appears to be neglected, even though it still provides jobs for 60 per cent of the working population and generates about a quarter of the region’s gross domestic product,” ESCAP said in its Survey.
It also said that growth and productivity in the sector have slowed and the green revolution appears to have by-passed million. “In South Asia, growth in agriculture dropped from 3.6 per cent in the 1980s to three per cent in 2002-2003,” ESCAP noted.
ESCAP said that by raising the average agricultural productivity across the region some 218 million, a third of the region’s poor, could be taken out of poverty. It also noted that “large gains in poverty are also possible through comprehensive liberalization of global agricultural trade, which could lift a further 48 million people out of poverty in the region.”
The policy focus needs to be on revitalizing agriculture. This, ESCAP said, requires connecting the poor to markets through improvements to rural infrastructure, the availability and management of water, agricultural technology, increasing the capacity to adapt technologies, and speeding up diversification and commercialization.
ESCAP said improving land distribution and access to credit and extension are also important, as well as making macroeconomic policy “friendlier to agriculture, all enabling the poor to make a dent on poverty by themselves.”
It also called for support for those looking to shift from agriculture to industry and services, whether it is still in rural areas or by way of migration to the cities.
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052