KATHMANDU, OCTOBER 5
The World Bank, in its latest 'South Asia Development Update (SDU), Toward Faster, Cleaner Growth' report has projected South Asia to grow by 5.8 per cent this year - higher than any other developing country region in the world, but slower than its pre-pandemic pace and not fast enough to meet its development goals.
Meanwhile, the bank's 'Nepal Development Update (NDU), Restoring Export Competitiveness' report has projected the country's economy to rebound to 3.9 per cent in the current fiscal year owing to a lagged impact of the lifting of import restrictions, strong rebound in tourism, and the gradual loosening of monetary policy.
Despite various challenges for South Asia, the energy transition could present an opportunity for future growth and job creation, experts suggest.
At a press briefing of the SADU and NDU held here today, Franziska Lieselotte Ohnsorge, chief economist for South Asia Region (SARCE), World Bank said that an energy transition in the region could be an opportunity for lifting productivity and growth, creating jobs, and reducing fuel reliance to address the existing economic challenges, and added that when doing so, it is also crucial to make sure that the most vulnerable are not affected.
"Every country other than India in the region has more workers in pollution-intensive jobs than in green jobs. If the energy transition gets underway which it will, the entire pollution-intensive workers will be looking for employment again. It is up to the government to make sure that the most vulnerable people are not affected by this transition and that means helping people move geographically across sectors.
Helping people to find jobs alone is not enough but creating jobs should also be a top priority," she said.
Presenting the findings of the report, Ohnsorge remarked that despite a challenging global environment at present, the South Asia region is doing well, and that growth is expected to be higher in this region than in any other emerging and developing markets, but still a slowdown compared to the pre-pandemic average and far from enough for countries in the region to meet their development goals.
"Apart from some adverse effects due to the slowdown in China, the region is at the most risk from climate change and natural disasters.
Also, many countries in this region stand out in their import, export restrictions, and capital controls than the average in any other emerging markets. Private investment has weakened across the region as well, while some have shown strong public investment growth. This region is also constrained by fiscal challenges as it has higher debt than any other. On average, government debt in South Asia is 86 per cent of GDP, more than any other emerging market and has also risen much faster," she shared.
Ohnsorge also explained that the current circumstances are exactly the ones where debt distress has been recorded historically. "Over 90 per cent of all defaults since 1970 across the world happened at the end of the US Federal Reserve tightening just like at present," she added.
She also said that boosting private investment and welcoming policies towards facilitating trade are some key areas where the government of Nepal and other regions can focus on to further encourage growth.
On the occasion, a panel discussion was also held on 'Productivity, Exchange rates, and Exports'. The discussion was moderated by Rajan Krishna Panta, director of Nepal Rastra Bank, with Aarti Rajya Laxmi Rana, chief business officer for Laxmi Sunrise Bank Ltd, Dorothee Lötscher, programme manager and first secretary for International Cooperation and Embassy of Switzerland in Nepal, and Paras Kharel, executive director of South Asia Watch on Trade, Economics, and Environment, as panellists.
Meanwhile, Ramesh Chandra Paudel, member of the National Planning Commission (NPC) said that the non-alignment of the country's education and production system, failure to capitalise on remittance inflows, decreasing trend of focusing on domestic production, among others, have stalled growth prospects of Nepal.
"Although, remittance inflows account for 30 per cent of GDP, we have not converted that into capital.
Another issue is the non-alignment of the country's education system we are adopting now and the production system of the nation itself. This might be the best time to remodel our education system. The production capacity of the remote areas has diminished. Our business model is collapsing somehow because no one has taken over those productive areas. At the same time, we are trying to build a macroeconomic system focused on reports that don't reflect the market. The Ministry of Finance, the National Planning Commission, and the Central Bureau of Statistics know where we lost our footing and those mistakes need to be corrected," he said.
A version of this article appears in the print on October 6, 2023, of The Himalayan Times
