Third quarter review published by NRB estimates per capita income of Nepal at USD 1,034 for FY 2075/76; Economic growth estimated to be 6.8% against the target of 8%
Economic Growth Rate
The Fiscal Year 2075/76 began with an ambitious promise of 8% economic growth rate target for the economy of Nepal, whilst containing the inflation under 6.5%. Nepal Rastra Bank (NRB) has published the third quarter review of Monetary Policy and according to it, the provisional estimate of Central Department of Statistics puts or economic growth rate for this year at 6.81%, a full 1.19% shy of the target.
The table above shows that, the economic growth rate was 7.74% for FY 2073/74 and 6.3% for FY 2074/75. It also shows a breakdown of the contribution from the agricultural and non-agriculture sector. Despite calling ourselves an agri-based economy, where maximum population still depends on farming to make ends meet, huge chunk of Gross Domestic Product (GDP) is stemming from non-agricultural sector. This might be a signal that we need to rethink our orientation and priorities as to how we can pursue better growth rates in the days to come.
Similarly, the table below mentions the estimated growth rates for each province for this fiscal year.
We can see from the table below that Karnali province is behind the rest in terms of growth rate and also its percentage share in the economy's GDP. Given the change in structure we can expect that the discrepancy will be addressed gradually in future, however, being too optimistic could also result in disappointment.
Macroeconomic indicators
The trade deficit has increased by 21.6% reaching Rs 991.81 arba. Similarly, the current account deficit and Balance of Payment (BOP) deficit has increased to Rs 204.47 arba and Rs 64.68 arba respectively.
The remittance has also grown by 20.9% to Rs 653.19 arba. Similarly, our foreign exchange reserve will last 9 months for goods and 7.9 months for goods and services. The table below shows the required information:
Other indicators
Apart from the growth rate, there are numerous other indicators that aids in extrapolating the performance of economy. Such indicators are lists hence forth:
The consumer price index stands at 4.2% for 9 months of FY 2075/76, which was 4.1% for the same period last year. The Monetary policy had targeted to maintain CPI under 6.5% and the mid-year review had estimated it to remain under 5.5%, and by the looks of it the figure will likely remain under the target.
Similarly, the per capita income is estimated to reach USD 1,034 for this fiscal year which was USD 998 for last year.
The main goal of the central bank, NRB, is to maintain price stability in the country and to do so its major tools are liquidity injection and mop up via instruments such as Treasury bills, Government bonds, Repo auction, Standing Liquidity Facility (SLF) and so on. Till the 9 months of this FY NRB injected liquidity worth Rs 49.25 arba, which was Rs 128.78 arba for last year's corresponding period. Likewise, NRB mopped up liquidity worth Rs 100.35 arba till 9 months of this FY and Rs 130.25 arba last year.
As we can see, the inter-bank transaction has caught quite the volume this year. The commercial banks have transacted Rs 1,165 arba this review period, which was only Rs 882.87 arba for corresponding period of last year. In case of other Banks and Financial Institutions (BFIs) the volume has increased from Rs 27.41 arba to a staggering Rs 119.33 arba.
However, we can see that the weighted average interest rates haven't changed that much. The rates varied greatly due to liquidity shortage, especially among commercial banks, but they were soon adjusted and because of that the weighted average rates are consistent.
