As the Covid-19 pandemic continues to impact every aspect of Nepal’s economy, the government has lowered economic growth projection to 2.3 percent for the current fiscal year. The government in the budget of the current fiscal year had set an ambitious economic growth target of 8.5 percent. Presenting the Economic Survey 2019/20 before the Federal Parliament on May 26, Finance Minister Dr Yuba Raj Khatiwada said that the Covid-19 pandemic is to be blamed for the sharp contraction. The estimation, is however, 0.03 percent higher than the economic growth projection of the Central Bureau of Statistics (CBS). CBS in April 29 estimated 2.27 percent economic growth for the current fiscal year.

In the Economic Survey report, the government has said that services sector, tourism, hotel industry, manufacturing, transportation, construction, and wholesale and retail trade have been hard hit by the pandemic leading to the country’s dismal economic growth. Unveiling the report, Dr Khatiwada said that Nepali economy, which was growing satisfactorily till February-March (Falgun) headed towards a deeper slump in the ensuing months. According to the Economic Survey 2019/20, the pandemic-induced economic crisis will aggravate unemployment and poverty. Nepal registered average economic growth of 7.3 percent in the last three years. “The Covid-19 pandemic has affected Nepal’s overall economic productivity and supply chain,” stated the report.

The government has predicted that tourism sector will decline the most in the current fiscal year due to abrupt halt in global travel and hospitality activities. The growth of the tourism sector, which was 7.3 percent in FY2018/19, will be negative 16.3 percent in the current fiscal year, according to the Economic Survey. Similarly, sectors such as transportation, storage and warehousing, communications, manufacturing, mining and construction will also register negative growth this year.

According to the Economic Survey, the contribution of agriculture sector to the country’s gross domestic product (GDP) has declined, while the contribution of non-agriculture sector has risen. The government has estimated that the contribution of agriculture sector to GDP will be 27.6 percent, while it will be 72.4 percent for non-agriculture sector.

Despite the steep decline in economic growth, income growth of citizens, however, will increase in the current fiscal year. The survey has forecasted that per capita income of Nepalis will grow by Rs 8,563 to reach to Rs 126,018 (USD 1,058) in FY2019/20.

Decline in Savings

According to the survey, savings of Nepalis in FY2019/20 has decreased compared to the last fiscal year. “Consumption will account 81.9 percent of GDP and savings will be 18.1 percent in the current fiscal year,” reads the report. In FY2018/19, the rates of consumption and savings were 79.5 percent of GDP and 20.5 percent, respectively.

Similarly, the survey has also predicted that total investment in the country will decline by 3.4 percent than last year to Rs 1,889.26 billion due to the increase in expenses on preventive measures against the spread of coronavirus deployed by the government and the private sector.

The per capita public debt has reached Rs 39,000 as of 2020 February-March (Falgun) which was Rs 36,000 in the corresponding period of last year. According to Economic Survey, public debt has amounted to Rs 1,139.80 as of February-March, increasing by Rs 91.90 billion in the nine months of the current fiscal year from Rs 1,047.90 billion in June-July of 2019.  “Strengthening economy, increase in per capita income and loan re-payment capacity of people, and acceleration in post-quake reconstruction have resulted in decline in foreign grant in development assistance. This has led to the growth of share of debt in GDP,” stated the survey. According to the report, the ratio of internal and external debt has been 38.6 percent and 61.4 percent, respectively.

Economists say that the Economic Survey has shown underlying problems of Nepali economy that have been exacerbated by the pandemic-induced crisis. “The survey has just presented the picture of eight months of the current fiscal year. But the economic momentum was already lethargic before this period,” said Jagdish Chandra Pokharel, former vice chairman of National Planning Commission (NPC), adding “A big trouble arrived in the country after eight months. But the government has failed to measure and evaluate the economic loss incurred by Nepal over the last two months.” He suggested the government to conduct a comprehensive study about the Covid-19 economic impacts so as to focus its efforts in the economic recovery.