Bhutan has a strong track record ofreducing poverty and boosting shared prosperity,primarilysupported by the state, which has played a largerole in the country's developmentaccomplishments.Growth has been driven mainly by the publicsector through hydropower development. Statedominance isalso reflected in the existence of a large number ofstate-owned enterprises (SOEs).However, the dependence onhydropower has resulted in a weak private sector and alsocreatedmacroeconomic vulnerabilities. The high importcontent of hydropower construction widened theexternalimbalance and increased indebtedness. In addition, taxcollection at 14 percent of grossdomestic product (GDP) in2017/18 is low by international standards. The governmenthas taken important steps to develop the nascent privatesector through investments in infrastructure andimprovements in the investment climate. It has also investedheavily in education and health. Despite these laudableinvestments, available jobs remain vacant, while educatedyouthremain unemployed. While hydropower will remaindominant in the foreseeable future, Bhutan'sdemographictransition requires more concerted efforts to develop theprivate sector.
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