September 18: Asian Development Bank (ADB) has forecasted Nepali economy to grow by 4.8 percent in FY 2073/74. The growth projection of the bank is 1.7 percent less than the government’s forecast. The government has targeted 6.5 percent economic growth in the current FY. 

Unveiling the Nepal Macroeconomic Update on September 16, ADB has projects 0.7 percent growth in the agricultural sector, 1 percent growth in industrial sector and 3 percent growth in service sector. “There are still disputes on the constitution and political parties are not committed on development. Therefore, the chances of improvement in the overall economy and achieving the government’s target in the growth rate are minimal,” said Kenichi Yokohama, Country Director of ADB for Nepal.  

The Manila-based multilateral agency concludes that the economic growth will be weak due to the sluggish rehabilitation and reconstruction works after the earthquake alongside the risks posed to the agriculture production by the recent flooding and landslides.  Similarly, the bank also mentions that the slow pace of budget implementation and reduction in remittance inflow will also affect the country’s economic growth.  ADB said that that the sharp decline in oil prices in the Gulf countries which are the major labour destinations of Nepali job seekers will negatively affect the remittance inflow. 

Meanwhile, ADB informed that the economic growth in the last FY had contracted to 0.8 percent due to the devastating earthquake and border blockade. The bank suggested easing trade and procurement mechanism, increase in remittance inflow, speedy pace of rehabilitation and reconstruction and execution of budget in order to achieve 4.8 percent economic growth.

ADB has sourced Ministry of Agricultural Development’s statistics on paddy transplantation. According to MoAD, 95 percent of 14 million hectares of land across the country has been planted with paddy in the current FY. However, the flooding and other natural disasters of last July have destroyed the paddy plantation in many areas limiting the agricultural growth to less than 1 percent, as per the report. According to ADB, the targeted growth depends on industrial and services sectors scenario, political situation, reconstruction works, pace of budget execution, recovery of tourism sector and remittance inflows. 

In the program, Country Director Kenichi Yokohama said that the economic growth in the current FY will increase than the last FY. According to him, though the implementation of budget is challenging, execution of budget and satisfactory pace of rehabilitation and reconstruction might boost the economy.  ADB predicts that the inflation rate will remain at 8.5 percent due to normalisation of production and supplies. Moreover, the bank said that the price of alcoholic and tobacco products might increase due to the rise in the excise duty. Meanwhile, ADB forecasts a minimal growth in restaurant and hotel menu due to the increase in demand in tourism sector which is recovering after the turmoil of last FY. ADB, in the current FY, has predicted inflation rate of food and non-food items at 3.4 percent and 4.2 percent respectively.