-Sharacchandra Bhandary

Nepal’s Gross Domestic Product (GDP) is projected to slow down to 5.3 percent in the current fiscal year. The economic growth rate stood at around 7.1 percent last year owing to high agricultural yields, rise in tourists’ arrival and increment in remittance flow as well as spurt in the investment from private sector.

It is estimated that the economic growth rate will see slowdown due to prevalence of nationwide lockdown enforced to suppress the spread of COVID-19 pandemic and reduction in production, service sector and remittance inflow.

According to the ‘Asian Development Outlook’ released by the Asian Development Bank at Manila today, average annual price inflation would see 6 percent increase in the current fiscal year due to disruption in production and supply chain resulting from the pandemic.

In the first seven months of the fiscal year, consumer price inflation of consumable goods and energy would increase to 6.5 percent from 4.,2 percent in the corresponding period of previous year. The price inflation is further likely to go to upward trend due to the effects of pandemic.

In the first seven months of the current fiscal year 2076-77 BS (2019-20), trade deficit (goods) reduced by 4.9 percent in compared to the 15 percent extension in the previous fiscal year.

The reduction in the size of trade deficit was a result of the increase in export with the encouraging export of palm oil and black cardamom to India and a fall in the import of construction materials, motor vehicles and petroleum products. The improved trade sheets had helped keep the current account deficit at one billion dollar till mid-February of the current fiscal against 1.5 billion dollar of the correspondent period previous fiscal year. Due to a fall in the import of petroleum products and capital and consumer goods, the deficit is predicted to slow down to 5.4 percent from 7.7 percent of the Gross Domestic Product of the fiscal year 2075-76 BS ( 2018-19).

However, the size of current account deficit is likely to get enlarged if there is a slip in remittance in the last quarterly of the current fiscal year.

The ADB’s forecast is that Nepal’s GDP in the upcoming fiscal year will be measured at 6.4 percent as its estimates that the COVID-19 crisis will end soon, paving a way for the operation of economic activities smoothly and monsoon will be at its normal pace.

The ADB has expected completion of 456 megawatts Upper Hydropower Project by fiscal year, 2077/78 and commercial operation of under-construction Gautam Buddha International Airport.

Average annual inflation in the fiscal year 2077/78 ( 2020-21) is expected to remain at 5.5 percent based on expectations that turbulent situation caused by coronavirus would return to normalcy, agricultural products increase, prices of petroleum products decrease and general increment in India’s inflation, the report said.

Gross Domestic Product is expected to increase from 5 percent to 5.6 percent following an increment in capital goods import and there would be a decrement in the price of petroleum products and an increment in the export of electricity to India, according to the report.

COVID-19 pandemic would cause in reduction of global demand and shrink outbound of workforce for overseas employment. Meanwhile, ADB Country Director for Nepal, Mukhtor Khamudkhanov, said that the nationwide lockdown imposed by the government to prevent COVID-19 spread across the globe would make negative impact on economy. Khamudkhanov pointed out the possibility of reduction in remittance inflow which also is likely to cause decline in the internal demand in last three months of the fiscal year with supply chain obstruction in industrial and service sectors.

He further said economic growth would also slow down due to fall in paddy production while noting economic growth rate of fiscal year 2076/77 BS would drop as compared to prediction if the COVID-triggered current situation goes worse. Increase in economic activities of the country has been expected once 456-MW Upper Tamakoshi Hydropower Project and Bhairahawa-based Gautam Buddha International Airport come into operation in coming fiscal year. It is expected that foreign direct investment would increase and industrial development would be supported with the operation of Special Economic Zone constructed at Bhairahawa as well as laxity in the process for the establishment of industry, tax and registration. Similarly, there would be economic prosperity in the country after implementing promotional programmes including exemption of tax to investors by Special Economic Zone Authority.