IMF predicts economic growth to hover around 5pc this fiscal
KATHMANDU:
Nepal’s economy is expected to expand by around five per cent in the current fiscal year, ‘fuelled by buoyant services on the back of remittance-induced consumption’, says the latest report of the International Monetary Fund (IMF).
The economic growth forecast made by the IMF for the fiscal 2014-15 is lower than six per cent estimated by the government, but higher than 4.6 per cent predicted by the Asian Development Bank. The country’s economy expanded by an estimated by 5.2 per cent in the last fiscal year, which ended in mid-July, according to the Central Bureau of Statistics.
The country’s economic growth rate is unlikely to hit the level of last fiscal due to possibility of fall in growth rate of the agricultural sector.
Agricultural sector, which makes a contribution of around 33 per cent to the gross domestic product (GDP), is likely to come under pressure this fiscal owing to drop in paddy output because of inadequate rain.
Paddy accounts for over 20 per cent of the total agro production and makes a contribution of around seven per cent to the GDP.
Although the possibility of fall in growth rate of agricultural production was expected to drive up consumer prices — because huge portion of income is used to purchase food items — the IMF’s latest South Asia Regional Update has predicted inflation to moderate at 7.8 per cent.
The IMF’s inflation prediction is lower than that of Nepal Rastra Bank (NRB), which has set a target of containing consumer price hike at eight per cent this fiscal year. Average inflation stood at 9.1 per cent in the last fiscal, according to NRB.
Prices of goods and services are expected to increase at a relatively slower pace this fiscal because of recent fall in global oil prices, which is most likely to bring down transport and production costs, among others. Another reason for this could be moderation in remittance income.
“Although remittance growth is projected to moderate, the current account should remain in surplus (this fiscal year), further boosting international reserves,” says the IMF report.
Current account is the sum of difference between exports and imports of goods and services, net income from abroad and net current transfers.
The IMF has estimated current account surplus to stand at 3.2 per cent of the GDP in the current fiscal year. Nepal and Afghanistan are the two South Asian countries that are likely to register current account surplus this fiscal, shows the IMF report.
Also, the country is expected to have a fiscal surplus to the tune of 0.2 per cent of the GDP in the current fiscal year, says the IMF report. Nepal is the only South Asian nation that is likely to register a fiscal surplus this fiscal.
Nepal’s fiscal position was in surplus last fiscal year as well, on account of under-execution of spending amid solid revenue growth, says the IMF report.
Source: THT
