Kathmandu, April 11

The country's economy is projected to grow by 4.9 per cent in the current fiscal from 6.9 per cent of the previous fiscal year as agriculture production, tourism, wholesale and retail trade, industrial output and construction sector performed modestly well in this fiscal.

Unveiling the Asian Development Outlook, the Asian Development Bank (ADB), today, said that the multilateral development partner is optimistic about the country's economic growth in this fiscal following the high base of last fiscal.

In coming fiscal 2018-19, the country's growth is expected to improve to 5.5 per cent along with the completion of the country's highest capacity 456-megawatt Upper Tamakoshi Hydropower Project, which is scheduled to be completed by the middle of next fiscal.

In September, the ADB had projected 4.7 per cent growth, which has been revised up following data from the Ministry of Agriculture, Land Management and Cooperatives, which reveals that the decrease in paddy production stands at only 1.5 per cent to 5.1 million tonnes and production of summer crops like maize and millet is also expected to rise in this fiscal.

Earlier, based on the preliminary estimate of paddy production of the government, ADB had assumed a huge loss in paddy production as the floods had inundated paddy fields in the Tarai.

Similarly, even with increased capacity utilisation of industries, industrial growth is set to be lower in this fiscal from the high base of industrial growth in last fiscal.

As per Sharad Bhandari, principal economist of the ADB Nepal Resident Mission, the country requires massive investment in sectors like manufacturing, agriculture and infrastructure, among others, to cope with the existing bottlenecks to leap forward towards higher growth trajectory. “Low investment is the major constraint to achieving the desired growth target.”

Nepal's economy is largely driven by the services and agriculture sectors due to low contribution of the manufacturing sector in the country's gross domestic product. As per the Asian Development Outlook, the services sector will, however remain buoyant given the expansion of wholesale and retail trade, financial intermediation and travel and tourism sub-sectors.

Growth in the Nepali economy is modest as compared to Asia's average economic growth, which is projected to hover around six per cent in 2018 and 5.9 per cent in 2019.

The Asian Development Outlook has anticipated the annual inflation in Nepal to rise moderately to 5.5 per cent in this fiscal from 4.5 per cent of the previous fiscal. “Inflation as of mid-February moderated on the back of modest oil prices, ease in supply of goods, and subdued inflation in India - the major trading partner to whose currency the Nepali rupee is pegged,” said the macroeconomic update of ADB.

“It will nonetheless likely inch up in the remaining months of this fiscal as base effects erode and government expenditures increase with the fiscal transfers provided to meet spending needs of provincial and local governments and the planned disbursement of relief grants to earthquake victims.”

The average annual inflation is expected to edge up to six per cent in the next fiscal.