June 6: Nepal has the potential to double its Gross Domestic Product (GDP) per capita in the long run if it achieves the benchmarks of complete education and full health, says the latest report of the World Bank unveiled during the second day of the Human Capital Forum held in Kathmandu on Thursday, June 6.

According to the World Bank’s Nepal Development Update, investing in human resources could help propel Nepal toward its goal of middle-income country by increasing the productivity and competitiveness of labor, leading to accelerated inclusive growth.

The report presents a hopeful picture for Nepal in the FY2019/20. The country’s economic growth is estimated to reach 7.1 percent, driven by the service and agriculture sectors, reads a press statement issued by the World Bank.

The statement says that the service sector is likely to grow by 7.5 percent due to a boost in the retail, hotel, and restaurant subsectors, driven by an increase in tourist arrivals and remittance-fueled private consumption. Likewise, good monsoon, increased commercialization, availability of fertilizers and seeds, and improved irrigation facilities have supported growth in the agriculture sector. The improved power availability from increased electricity generation is expected to support higher growth in industry.

“Investing in people so that all citizens of Nepal are able to achieve full education and health to perform at their full potential will be critical, in order to sustain the recent high levels of growth and increase competitiveness,” said Dr Kene Ezemenari, World Bank’s senior economist and author of the report adding, “This will require reducing inequities in access to services, improving the quality of services and minimizing household vulnerabilities to shocks.”

The report notes that investing in people and building human capital are critical if Nepal is to accelerate its growth and rapidly reduce poverty. Human capital investments raise individual earnings potential, which in turn contributes to aggregate economic growth.

“One additional year of schooling in Nepal can raise an individual’s earnings by 8 to 10 percent. Undernutrition reduces learning potential and productivity and can reduce GDP by as much as 11 percent. Investing in psychosocial stimulation during a child’s early years can raise his or her adult income by up to 25 percent,” reads the statement.

The report highlights the need for more exports if Nepal is to sustain the recent high levels of economic growth. Over the medium term, the report projects GDP will grow at 6.5 percent on average, driven by private investment and consumption. Inflation is expected to pick up slightly but will remain below 5 percent during the forecast period assuming stable agricultural production, regular supply of electricity, and low inflation in India.

Similarly, Minister for Finance, Dr Yuba Raj Khatiwada also shared, “Our utmost priority remains the development of our children and youth – we need to scope up and maintain sustainable investments in the younger generation to ensure they remain productive and competitive with the global workforce.” He said that the government has initiated a number of reforms and policies to strengthen the investment and business environment and attract foreign investment. Dr Khatiwada also said, “The recently released budget has also been carefully designed to ensure an enhancement of education, health and drinking water sectors and creation of job opportunities in the country to ensure people’s fundamental rights.”