Frequent strikes, persistent labour problems and severe electricity shortages coupled with low agriculture growth due to advese weather conditions slowed down growth to 3.5 per cent in 2010 from four per cent a year ago, according to Economic and Social Survey of Asia and the Pacific, released here in the Valley today.
However, the flagship publication of Economic and Social Commission for Asia and the Pacific (ESCAP) – the regional arm of the UN that outlines a policy agenda for sustaining dynamism and inclusive development for an Asia-Pacific century -- projected gross domestic production (GDP) at four per cent for 2011. But it also pointed out that economic revival in the country hinges in large part on the ability of government to improve law and order , as the poor security and political instability limits the government's capacity to spend money and boost rural incomes.
High inflation is a key challenge as food prices rise rapidly, according to the report. "Inflation in Nepal is closely linked to inflation in India because of the fixed exchange rates between the currencies of the two countries as well as close economic ties between them," said central bank governor Dr Yub Raj Khatiwada after launching the report.
"There is some deceleration in inflation in 2010 compared to a year ago, but it has again picked up to a double digit and remained as high at 10.7 per cent," he said, adding that the food prices has increased at a much higher rate lately.
The report also highlighted drop in budget deficit. "The budge deficit has declined to 3.9 per cent of GDP in 2010 from five per cent in 2009," it said, adding that with growing tax revenues, the tax-to-GDP ratio has been improving and it stood at over 13 per cent in 2010.
Similarly, the report pointed out that exports revived but imports grow more rapidly. "While exports contracted, imports grew at a faster rate in 2010 widening the trade deficit," according to the report.
"The intra-regional trading could not pick up," Dr Posh Raj Pandey, executive chairman of SAWTEE, said, adding that trading in the region is a costlier affair than trading outside the region, though economies of Asia and the Pacific recovered strongly in 2010 from the Great Recession of 2008-09, but they face fresh challenges in 2011.
These include the return of the food and fuel price crises, sluggish recovery in the advanced economies and a deluge of short term capital flows that is leading to volatility in capital markets, asset bubbles and appreciating exchange rates, the 2011 edition of the Economic and Social Survey of Asia and the Pacific -- the oldest annual review of development in the region -- stated. "The economic recovery of the region thus far and the critical issues, policy challenges and risks facing the region in the coming months," according to the report that suspected compromise of achievement of sustained South Asian high growth due to price hike.
KATHMANDU: The report highlited strong and sustained growth momentum in the sub region to tackle long-term problem of widespread poverty. "Atleast one in every three person in South Asia is classified as poor," the report said, adding that fight gaints poverty, therefore, must continue. "Countries need to continue pursuing economic reforms to improve productivity, streghten public institution, improve economic governance and build social safety nets to protect tje more vulnerabl;e segments of the population.
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