KATHMANDU, JULY 21
The Asian Development Bank (ADB) has said Nepal's monetary policy will likely remain tight and the country will continue to face geopolitical and economic risks stemming from the war in Ukraine.
The ADB's Asian Development Outlook (ADO) 2022 Supplement, released today, has said, "For fiscal year 2022- 23, a normal monsoon and the timely availability of farm inputs, particularly chemical fertilisers, and smooth provincial and federal elections are expected."
Latest official estimates show that Nepal's economy grew by 5.8 per cent in fiscal year 2021-22 (ended July 15, 2022), higher than ADO 2022's projection issued in April. The estimate is underpinned by an ongoing vaccination campaign that has fostered a gradual normalisation in economic activity and a steady path to higher growth supported by accommodative macroeconomic policies.
Inflation in Nepal is expected to be marginally lower in fiscal year 2021-22 than earlier forecast, by 30 basis points.
The revision aligns with official inflation data for the first 10 months of fiscal year 2021- 22, as per the ADO Supplement.
Meanwhile, South Asia's inflation forecast has been revised up from 6.5 per cent to 7.8 per cent for 2022 and from 5.5 per cent to 6.6 per cent for 2023 on expectations that global prices for fuel, food, and other commodities will remain elevated and due to domestic factors in some economies.
South Asia's economy is expected to expand less than ADO 2022's projection. This mainly reflects a modest downward revision to India's forecast GDP growth due to higher-than-anticipated inflation since April and monetary tightening, and Sri Lanka's sharp GDP contraction due to the country's sovereign debt and balance-of-payment crises. The growth prospects for the subregion's other economies are largely unchanged as various positives balance out global headwinds.
On balance, the growth forecast for South Asia has been revised down from seven per cent to 6.5 per cent for 2022 and from 7.4 per cent to 7.1 per cent for 2023.
Reflecting worsened economic prospects, growth forecasts for developing Asia have been revised down relative to those in the ADO in April: From 5.2 per cent to 4.6 per cent for 2022, and from 5.3 per cent to 5.2 per cent for 2023. Risks to the region's economic outlook remain elevated, and mainly associated with external factors. A substantial slowdown in global growth could adversely affect exports, manufacturing activity and employment prospects, and cause turbulence in financial markets.
"The economic impact of the pandemic has declined across most of Asia, but we're far from a full and sustainable recovery," ADB Chief Economist Albert Park has been quoted as saying in a media release.
"On top of the slowdown in China, fallout from the war in Ukraine has added to inflationary pressure that's causing central banks around the world to raise interest rates, acting as a brake on growth. It's crucial to address all these global uncertainties, which continue to pose risks to the region's recovery."
A version of this article appears in the print on July 22, 2022, of The Himalayan Times.
