Nepal | September 26, 2020

Govt revises economic growth target down to 7.01 per cent

Low agricultural growth anticipation behind projection

Sujan Dhungana
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Kathmandu, November 14

The government has revised the economic growth target for the ongoing fiscal by 1.49 percentage points to 7.01 per cent.

Though the government had anticipated economic growth of 8.5 per cent in fiscal 2019-20, the Ministry of Finance has lowered the economic growth projection based on the budget implementation trend of the first three months of the fiscal.

MoF officials said the revised economic growth projection, which was made public today, was primarily backed by anticipation of low agricultural growth in 2019-20 and government expenditure failing to gather pace.

Following the projected fall in production of paddy this year due to faulty Garima seeds, the government expects a drop in overall agricultural output in this fiscal as paddy has a major stake in total agricultural production. The drop in agriculture output is also expected to hit the entire economy, as it has 28.5 per cent stake in the country’s gross domestic product value.

The government has also not been able to improve its capital expenditure, indicating low pace of development and economic activities across the country. In the first three months of the current fiscal, the government managed to spend merely 5.78 per cent or Rs 23.97 billion of the Rs 408 billion allocated under capital expenditure for the current fiscal.

“All these factors show that we will not be able to meet the economic growth target initially projected for 2019-20,” said an official at MoF seeking anonymity.

Earlier, the World Bank had projected Nepal’s economy to grow at 7.1 per cent in the ongoing fiscal year, primarily driven by private investment and consumption. The Asian Development Bank, on the other hand, has forecast Nepal’s economy to grow at 6.3 per cent in the ongoing fiscal, stating that the country’s economy can expand further if capital expenditure, including at the sub-national level, improves substantially and private investment remains strong.

Economists have said that though achieving 8.5 per cent economic growth is not a big deal, the government has not been able to manage necessary infrastructure to boost the economy.

“Along with inadequate infrastructure, the government has not managed to expedite project development and budget expenditure, improve project implementation and attract ample investment,” said Biswo Poudel, an economist, adding that achieving the initial economic growth target of 8.5 per cent against this backdrop would have been difficult.

Of late, the private sector is also complaining about the deteriorating business environment in the country. Following the recent arrest of renowned industrialist Roop Jyoti and the former chief executive officer of Bank of Kathmandu Ajaya Shrestha, the Federation of Nepalese Chambers of Commerce and Industry had issued a statement saying that the private sector — which is the driving force behind economic growth in any country — is losing confidence. The federation, however, had not specifically mentioned Jyoti or Shrestha in its statement.

A version of this article appears in print on November 15, 2019 of The Himalayan Times.

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