At 3.04 pc, economic growth to be lowest in 7 yrs

KATHMANDU, July 13:

The economic growth in the fiscal year 2014-15 is projected to shrink to 3.04 percent, the lowest in the last seven years. An unfavorable monsoon and the effects of the earthquake are blamed for the plunge in growth in GDP at basic prices.

Growth in agriculture will come down to 1.9 percent from 2.9 percent of last year while growth in industry is expected to plunge to 2.6 percent from 6.2 percent, according to the Economic Survey Report tabled in parliament on Sunday.

ikewise, service sector growth will decline to 3.9 percent from 6.3 percent of last year.

Tabling the report in parliament, Finance Minister Ram Sharan Mahat portrayed almost all the economic indicators as disappointing. The devastating earthquake has inflicted huge damage on the GDP, said Mahat. The effect is huge in tourism, infrastructure, real estate, agriculture, and finance, said the report. The report also said that the government faces a challenging task of restoring all the affected sectors to normal and making the engine of growth move smoothly.

The report says that the target of graduating to a developing country by 2022 through the achievement of average annual growth of 7 to 8 percent now seems challenging.

Export figures are negative while imports have surged by 10 percent. Though inflation has been tamed at 7 percent, Finance Minister Mahat expressed worry that it will go up to 8 percent, owing to higher demand and supply constraints.

According to the figures for eight months, expenditure progress is only 46.5 percent out of the total budget of Rs 618 billion. Mahat said that the need is to enhance the capacity of the public sector to increase spending.

Disbursement of foreign grants has also declined, by 16.4 percent, during the eight months to Rs 14.3 billion, compared to the disbursed amount in the same eight-month period last year. There is a widening difference between the commitments from donors and the utilization of the funds. The average spending of such funds hovers at around 50 percent only. Mahat again stressed increasing the disbursement of foreign grants through reforms and capacity enhancements.

The report says that the factors behind slow growth are lack of energy, poor infrastructure and lack of expected improvements in the investment climate, as well as very little progress in the manufacturing sector.

The report also stresses reforms in policy and management as well as structural reform, for increasing capital expenditure, which has remained only 3.4 percent of GDP on average in recent years.

Source: Republica