MSR report shows overall employment improving, but youth unemployment projected to exceed 20% by 2027
TIL BDR GHALLEY | Thimphu
Bhutan’s overall unemployment rate is projected to average 3.1 percent in 2025, according to the Macroeconomic Situation Report: First Quarter Update FY 2025–26 released by the Ministry of Finance.
While general unemployment is expected to continue a gradual decline over the medium term, youth unemployment remains significantly higher and is projected to rise further in the coming years.
The report states that the unemployment rate stood at 3.2 percent in the third quarter of 2025, a slight increase from 2.9 percent in the previous quarter. The quarterly increase is attributed to seasonal factors, structural challenges in the labour market, urban concentration of job seekers, and slower job creation amid ongoing economic adjustments.
Despite the short-term uptick, unemployment is projected to decline to 2.8 percent in the fourth quarter of 2025, resulting in an annual average unemployment rate of 3.1 percent, corresponding to an employment rate of 96.9 percent.
On a year-on-year basis, unemployment in the third quarter of 2025 was marginally higher than the 3.1 percent recorded during the same quarter in 2024.
However, compared to the fourth quarter of 2024—when unemployment also stood at 3.1 percent—the projected decline in the final quarter of 2025 suggests gradual improvement in labour absorption. Over the medium term, the unemployment rate is forecast to decline further to 2.7 percent in 2026 and 2.6 percent in 2027.
The report also notes that unemployment continues to be higher in urban areas than in rural areas, reflecting greater labour concentration and increased competition for jobs in urban centres, particularly among educated youth.
While the overall unemployment trend shows improvement, youth unemployment remains a major concern. The youth unemployment rate increased to 17.8 percent in the third quarter of 2025, up by 0.5 percentage points from the previous quarter.
The increase is linked to seasonal inflows of new job seekers, particularly graduates, and persistent mismatches between labour supply and demand.
For the full year, youth unemployment is projected to average 17.6 percent in 2025, slightly lower than earlier estimates.
However, the report projects youth unemployment to rise to 20.1 percent in 2026 and 20.9 percent in 2027, highlighting continued structural challenges within the labour market.
These challenges are reflected in the experiences of young job seekers across urban centres. “I graduated with a degree in business management, but most employers are looking for experience or very specific skills,” said Gyeltshen Ghalley, a 24-year-old job seeker in Thimphu, who has been unemployed for more than a year. “There are vacancies, but competition is intense, and many of us are applying for the same positions.”
Tshering Yangzom, 25 years, who recently completed her degree in hotel management said that while short-term jobs are available, long-term employment remains uncertain. “Many opportunities are contractual or project-based. It’s difficult to find stable employment that allows us to plan our future,” she said.
The report attributes persistently high youth unemployment to several structural factors, including a growing number of young entrants into the labour force, limited availability of high-skilled and high-productivity jobs, and misalignment between education and training outcomes and labour market needs. Urban concentration of job seekers further intensifies competition for limited opportunities.
At the same time, labour market participation has increased. The labour force expanded to 398,039 persons in the third quarter of 2025, an increase of 3,280 people compared to the previous quarter and 6,927 compared to the same period in 2024. This growth reflects both demographic trends and increased participation among working-age individuals.
The Labour Force Participation Rate (LFPR) rose to 65.5 percent in the third quarter of 2025, marking an increase of 0.2 percentage points quarter-on-quarter and 0.4 percentage points year-on-year.
The increase indicates improved confidence in job prospects and greater engagement in the labour market. The LFPR is expected to remain stable at 65.5 percent in the fourth quarter of 2025, before easing slightly to 64.7 percent in 2026 and 2027.
For young job seekers, however, higher participation does not always translate into employment. “More people are looking for jobs, especially in cities, but the number of suitable jobs hasn’t grown at the same pace,” said Kamala Gurung graduate preparing for private-sector recruitment exams.
While overall unemployment is projected to decline gradually, youth unemployment is expected to remain a persistent feature of Bhutan’s labour market over the medium term, driven by structural and demographic pressures.
