Nepal | November 27, 2020

Economic growth to slow down to 4.7pc: ADB

Himalayan News Service
Share Now:

Kathmandu, September 26

The Asian Development Bank (ADB) has projected that Nepal’s economic growth will slow down to 4.7 per cent in this fiscal as compared to 6.9 per cent of the previous fiscal 2016-17.

Growth forecast of this fiscal has been revised down from the earlier estimate of 5.4 per cent in the wake of severe floods and landslides in August that affected one-third of the country, resulting in the loss of human lives and livelihoods, and destruction of crops, says the latest Macroeconomic Update of ADB released today.

The pace of growth of Nepal’s economy will slow down as compared to the high growth of last fiscal, as the agriculture and livestock sector was badly hit by the severe floods and the subsequent destruction during the time. The ADB’s macroeconomic report has said that the agriculture sector is expected to expand by just 2.4 per cent in fiscal 2017-18, compared to 5.3 per cent of last fiscal owing to the destruction of paddy plantation and other major crops in the Tarai belt of Nepal, which is considered the rice bowl of the country.

However, the industry sector is expected to expand by 6.6 per cent in the current fiscal as a result of the regular supply of electricity and availability of construction materials. The services sector, meanwhile, is projected to grow by 5.5 per cent in this fiscal due to an expansion of the financial intermediation, wholesale and retail trade, and tourism subsectors.

“The economy rebounded strongly in fiscal 2016-17 from fiscal 2015-16, which was a difficult year due to various external shocks. This year, we expect economic growth to be a bit tepid compared to last fiscal, partly because of the floods,” said Sharad Bhandari, principal economist and officer-in-charge of ADB’s Nepal Resident Mission. “Reforms to improve the quality of public and private investment and to encourage a competitive private sector would reduce the economy’s dependence on external factors such as the monsoon and remittances.”

The update says inflation is expected to rise moderately to 6.5 per cent in the current fiscal from 4.5 per cent of last fiscal, partly reflecting lower inflation in India and the expansionary budget of this fiscal. Food price inflation is expected to go up due to huge loss of agricultural products. The Nepal Macro Economic report further states that the fiscal transfer and election expenditures compounded by depressed farm output will exert inflationary pressure in the current fiscal.

Despite improved revenue collection at Rs 609.1 billion (23.4 per cent of GDP), the fiscal deficit widened to 5.2 per cent of gross domestic product (GDP) in fiscal 2016-17 following a rise in government expenditure compared to a year earlier. While the execution rate of capital expenditure has hovered around 72.1 per cent between fiscals 2011-12 and 2016-17, its year-on-year growth has remained solid. However, the low execution rate could well be an indication of an overambitious target set by the government, says the report.

“Growth in merchandise exports has been weaker than the rise in imports, leading to a widening merchandise trade deficit. The growth in remittances is expected to drop following a decline in the number of workers going abroad in fiscal 2016-17. Nepal increasingly faces the risk of external sector instability with a slower rise in remittances and ballooning merchandise trade deficit.”

The growth in services exports, on the other hand, has been brighter. The services sector accounted for 66 per cent of the total exports and 14 per cent of the total imports in the last fiscal, indicating its growing importance in external trade. But because of infrastructural, institutional, legal, and procedural barriers, the services trade in Nepal has yet to achieve its full potential, the report says.

The ADB’s projection is far below the government’s growth projection of 7.2 per cent and on par with World Bank’s recent projection of 4.6 per cent.

 


A version of this article appears in print on September 27, 2017 of The Himalayan Times.


Follow The Himalayan Times on Twitter and Facebook

Recommended Stories:

More from The Himalayan Times:

23 more fatalities registered today, Covid-19 death-toll hits 1,412

KATHMANDU: Twenty-three more fatalities were reported in the last 24 hours with which Nepal’s Covid-19 death-tally has now advanced to 1,412. Meanwhile, 1,614 fresh coronavirus cases as reported today took the nationwide coronavirus case count to 227,640. Over 1.4 million deaths from the dis Read More...

1,614 new cases recorded on Thursday; Nepal’s Covid-19 tally hits 227,640

KATHMANDU: Nepal on Thursday reported 1,614 new cases of coronavirus infection from across the country. With this, the nationwide infection count has advanced to 227,640. Of the total cases, 640 are females while 974 are males. In the last 24 hours, 785 cases surfaced in Kathmandu Valley of Read More...

785 additional Covid-19 cases reported in the valley on Thursday

KATHMANDU: The three districts of Kathmandu Valley reported a total of 785 new cases of coronavirus infection on Thursday. Of the new cases, 337 are females and 448 are males. As many as 620 cases were recorded in Kathmandu district while Lalitpur and Bhaktapur reported 114 and 51 cases respec Read More...

Two cadres of Biplav-led CPN arrested in connection to explosion in Udayapur

GAIGHAT: Two cadres of Netra Bikram Chand (Biplav)-led Communist Party of Nepal (CPN) have been arrested on the charge of carrying out the explosion in Tapli Rural Municipality of Udayapur district. Police arrested Gaur Bahadur Devkota of Ruptar and Rita BK of Okhle, in Tapli rural municipality's Read More...

Nepal Covid Update: 1614 new cases, 1437 recoveries, 23 deaths on Thursday

KATHMANDU: Nepal’s Health Ministry, in its regular press briefing, shared the latest updates on coronavirus contagion from across the country, and government’s response to the health crisis. Till date, 1,700,000 tests through Polymerase Chain Reaction (PCR) method have been carried out wherei Read More...

Naples' mayor begins process to rename stadium for Maradona

The mayor of Naples started the formal process to rename the San Paolo stadium for Diego Maradona on Thursday. The move comes with the city in mourning for the soccer great, who died Wednesday of a heart attack at age 60, two weeks after being released from a hospital in Buenos Aires following Read More...

Bayern reach knockout stage with 3-1 win over Salzburg

MUNICH: Holders Bayern Munich failed to hit top form but did enough for a 3-1 win over visitors Salzburg on Wednesday to book their spot in the Champions League knockout stage with two games to spare. The German champions stretched their record run to 15 straight wins in the competition, with Read More...

KP Sharma Oli, Harsh Vardhan Shringla

Visiting Indian foreign secretary's high-level meetings continue, calls on PM KP Sharma Oli

KATHMANDU: Visiting Indian foreign secretary Harsh Vardhan Shringla paid a courtesy call on Prime Minister KP Sharma Oli on Thursday evening. The meeting was held at the Prime Minister's official residence in Baluwatar. Prior to meeting the PM, Shringla had met with Foreign Affairs Min Read More...