World Bank cuts Nepal growth forecast to 3.8 percent
KATHMANDU, JAN 17 -
The World Bank has cut Nepal’s growth forecast to 3.8 percent for the current fiscal year 2012-13, citing bad performance in agriculture and industrial sectors. Nepal’s economy had grown at 4.6 percent rate in last fiscal year 2011-12.
The International Monetary Fund (IMF), in December 2012, had also predicted that Nepal’s gross domestic product would grow at the same rate.
The bank said in its latest Global Economic Prospect Report that delayed monsoon and fertiliser shortages reduced rice production in many parts of the country in 2012 following a good harvest in the previous crop year. Other factors hitting the economy, according to the WB report, are the ongoing constitutional crisis, weak investment climate, and infrastructure bottlenecks. “These factors have eroded business confidence and adversely affected investment and industrial activity,” states the report.
Economist Madan Kumar Dahal said the WB projection reflected the protracted political transition and the growth rate could decline further. “As a result of political problems, capital expenditure has remained poor and the resources that went to local governments for development purposes have been misused in absence of elected bodies. This has hit growth prospects,” said Dahal. “Low investment in agriculture and poor industrial relations will also affect growth this year.”
For 2014-15, the WB has predicted Nepal’s GDP to inch up by 4.3 percent, with political and economic situation starting to normalise. The global lender also said inflation (near 10 percent) in Nepal and few other South Asian countries, including India, Pakistan and Sri Lanka, is significantly higher than the average for developing countries.
“In Nepal, the continuing political crisis and infrastructure constraints mean that domestic supplies are not keeping pace with robust demand, resulting in persistent inflationary pressures,” states the report.
Highlighting the role of remittance in Nepal, the report has said remittances are expected to remain relatively stable and significant source of financing, together with tourism revenues.
The report said remittance will support consumption demand during this period of uncertainty as well as finance import of petroleum products and cover the trade deficit with India.
The bank said remittance flow, notably from the oil-rich Gulf Cooperation Council (GCC) countries, are to provide a relatively stable source of hard currency earning for South Asian countries. The size of remittance in Nepal is 22 percent of the gross domestic product.
Source: The Kathmandu Post
