Nepal is projected to experience a 3.87 percent growth in the current fiscal year, driven by optimistic scenarios like trade recovery and robust tourism growth, according to estimates from the National Statistics Office. This positive outlook suggests that Nepal’s gross domestic product (GDP) could reach Rs5.70 trillion by mid-July.
The growth estimate provided by the National Statistics Office slightly surpasses the Asian Development Bank’s projection of 3.6 percent, while the World Bank forecasts a growth rate of 3.3 percent. Initially targeting a robust 6 percent growth, the government’s aims are slightly lower.
Deputy Chief Statistician at the National Statistics Office, Hem Raj Regmi, highlighted the growth figure as indicative of the country’s economic recovery. He noted a 2 percent growth in the last fiscal year, with expectations of adding another 2 percent this fiscal year.
Based on actual data for nine months and projected data for the final quarter of the financial year, the statistical office predicts optimistic growth in trade, wholesale and retail businesses, and hotels and accommodation for the next three months.
Nepal’s economy has faced historical challenges, including a decade-long Maoist insurgency, strikes, power outages, earthquakes, and the COVID-19 pandemic. Despite these obstacles, the economy rebounded after the 2015 earthquakes, recording a growth rate of 8.98 percent in the fiscal year 2016-17, the highest since 1993-94.
However, the COVID-19 pandemic led to a contraction of 2.37 percent in Nepal’s economy in the fiscal year 2019-20, marking the first annual negative growth rate since 1982-1983. This contraction can be attributed to various factors, including droughts and political instability.
While Nepal’s economy has shown signs of recovery post-pandemic, it continues to face challenges such as political instability and slow government and private sector spending. Private investment has remained sluggish, and public consumption and investment have contracted due to austerity measures and low revenue collection.
Regmi stressed the importance of increasing expenditure and encouraging private sector investment to achieve sustainable economic growth. He suggested that Nepal’s growth rate is unlikely to change significantly in the near future, emphasizing the need for government policies to stimulate economic activity.
The statistical office also projected increases in per capita gross national income and GDP for the current fiscal year. However, the savings rate remains low, with people saving only 7.62 percent of their income on average.
While the agriculture sector is expected to grow by 3.05 percent this fiscal year, the manufacturing and construction sectors are projected to decline by 1.60 percent and 2.07 percent, respectively.
Despite challenges, accommodation and food service activities, linked to tourism, are expected to see robust growth of 21.84 percent, followed by the electricity and gas subsector.
Overall, Nepal’s economy faces challenges such as inflationary pressures, a credit crunch, and rising unemployment. Encouraging private sector investment and consumer spending will be vital to stimulate economic growth and recovery.