2018 Index of Economic Freedom


overall score61.8
world rank87
Rule of Law

Property Rights60.9

Government Integrity50.9

Judicial Effectiveness51.6

Government Size

Government Spending72.2

Tax Burden83.0

Fiscal Health80.0

Regulatory Efficiency

Business Freedom72.5

Labor Freedom75.7

Monetary Freedom70.5

Open Markets

Trade Freedom74.4

Investment Freedom20.0

Financial Freedom30.0

Embed This Data

Create a Comparison Chart

See how Bhutan compares to another country using any of the measures in the Index.

Download PDF
Quick Facts
  • Population:
    • 0.8 million
  • GDP (PPP):
    • $6.5 billion
    • 7.7% growth
    • 5.3% 5-year compound annual growth
    • $8,227 per capita
  • Unemployment:
    • 2.4%
  • Inflation (CPI):
    • 4.2%
  • FDI Inflow:
    • $-12.5 million
Embed This Data

Bhutan’s economic freedom score is 61.8, making its economy the 87th freest in the 2018 Index. Its overall score has increased by 3.4 points, led by a spike in the score for fiscal health and sustained progress in trade freedom and government integrity. Bhutan is ranked 20th among 43 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

Bhutan has made progress in modernizing its economic structure and reducing poverty. The public sector has long been the main source of economic growth, but the government now recognizes the importance of private-sector growth. Economic diversification is now a higher priority, particularly with demographic shifts bringing more young people into the labor market. The government has acted to ensure greater security for property rights. Constraints on private-sector development include an inefficient regulatory framework, significant nontariff barriers to trade, and a rudimentary investment code.



The small Himalayan kingdom of Bhutan made the transition from absolute monarchy to constitutional parliamentary democracy in 2008. In 2013, it completed its second democratic handover of power after Prime Minister Tshering Tobgay’s People’s Democratic Party won the majority of seats in the National Assembly. Bhutan has one of the world’s smallest and least-developed economies. Until a few decades ago, Bhutan was agrarian with few roads, little electricity, and no modern hospitals, but recent interregional economic cooperation, particularly involving trade with Bangladesh and India, is helping to encourage economic growth. Connections to global markets are limited and dominated by India. Bhutan’s largest export, hydropower to India, could spur sustainable growth if chronic construction delays are resolved.

Rule of LawView Methodology

Property Rights 60.9 Create a Graph using this measurement

Government Integrity 50.9 Create a Graph using this measurement

Judicial Effectiveness 51.6 Create a Graph using this measurement

In the World Bank’s Doing Business 2017 report, Bhutan’s scores for registering property and enforcing contracts remain unchanged at 51 and 47, respectively. The government generally respects judicial independence and requires that all cases be cleared within a year of filing. The law provides criminal penalties for corruption by officials, and the government generally implements these laws effectively.

Government SizeView Methodology

The top income tax rate is 25 percent, and the corporate tax rate is 30 percent. Other taxes include property and excise taxes. The overall tax burden equals 13.1 percent of total domestic income. Over the past three years, government spending has amounted to 30.5 percent of total output (GDP), and budget surpluses have averaged 0.2 percent of GDP. Public debt is equivalent to 110.2 percent of GDP.

Regulatory EfficiencyView Methodology

Complicated controls and uncertain industrial licensing, trade, labor, and finance policies inhibit business development. Hydropower, agriculture, and forestry provide the main livelihood for more than half of the population. Industrial production is mostly of the cottage industry type, and the country depends on India for financial assistance and migrant laborers. The state maintains financial and commercial price controls but has cut electricity subsidies.

Open MarketsView Methodology

Trade is significant for Bhutan’s economy; the combined value of exports and imports equals 82 percent of GDP. The average applied tariff rate is 2.8 percent. Nontariff barriers significantly impede trade. Government policies such as sectoral restrictions limit foreign investment. The government-controlled financial sector still does not fully meet private-sector credit needs. The banking sector remains burdened with nonperforming loans.

Country's Score Over Time

View Chart of Scores over Time

Regional Ranking

rank country overall change
1Hong Kong90.20.4
3New Zealand84.20.5
6Malaysia 74.50.7
7South Korea73.8-0.5
12Thailand 67.10.9
16Brunei Darussalam64.2-5.6
18Kyrgyz Republic 62.81.7
25Sri Lanka57.80.4
26Solomon Islands57.52.5
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
31Pakistan 54.41.6
43North Korea5.80.9
See Entire Region List ›

View all countries ›

Back to Top