According to the report of the UN Economic and Social Commission for Asia and Pacific, made public throughout the Asia on Thursday, Bhutan’s GDP growth rose dramatically from 5.5 percent in 2006 to 17.6 percent in 2007.

The report said, the spike in growth reflected private investment in housing, public investment in infrastructure and most importantly, continued work on the Tala hydropower project.

The construction of such projects has government the rhythm of economic activity in Bhutan for several years and will likely continue to determine it for several more. Similarly, Services maintained robust performance in 2007, driven chiefly by the trade and financial sectors.

Inflation in Bhutan has hovered around 5 percent in recent years. The deceleration in price increase was broad-based, covering both food and non-food items. The report further said that although the exchange rate peg promotes trade and speeds up monetization, bringing benefits to Bhutan, it can also limit the scope for independent monetary policy formulation since the prices in Bhutan largely follow those in India with which Bhutan has close trade and financial links.

Bhutan’s overall budget deficit, excluding income from grants, is quite large. If grants are included, it becomes more manageable. The budget deficit including income from grants rose to 3.5 percent of GDP in 2007, from 0.8 percent in 2006. With the Tala hydropower project coming on stream, a significant increase in government revenue is expected to lower the deficit.

Bhutan’s trade balance improved in 2007, with large exports of electricity to India and much of the Tala hydropower project coming on stream. The country’s current account balance turned to a surplus in 2007 and is expected to remain a surplus in the near future. Bhutan News Service