Though, the government has claimed to grow economy at 7 per cent, the World Bank has estimated to grow it at a nominal 2.1 per cent in the current fiscal year. The World Bank has also decreased last fiscal year’s economic growth rate to 1.8 per cent, from its earlier projection of somewhere between 1.5 per cent and 2.8 per cent, against the Central Bureau of Statistics’ (CBS) estimation of 2.3 per cent.
Economic growth is estimated to contract sharply to 2.1 per cent in the fiscal year 2020-21 from the Covid-19 pandemic and related lockdown, despite efforts by the government to curb the economic fallout from the crisis, reads the World Bank’s latest Nepal Development Update (NDU). Transitioning the economy from the relief stage through to restructuring and resilient recovery requires a strategic approach to get the country back on a sustainable and inclusive growth path, it reads, adding that the economic activity in the tourism sector will remain weak and remittances inflows will be moderate. “Supply chain disruptions will keep industrial and agricultural production low.”
Likewise, low economic activity and oil prices will also keep imports low and below the pre-crisis levels, leading to a projected narrowing of the current account deficit to 6.5 per cent of GDP, it adds. “Lower imports will continue to limit revenue collection.”
However, fiscal measures announced as part of the fiscal year fiscal year 2020-21 budget, including a revision of custom duties, will provide some support to the budget as spending levels on relief and recovery efforts remain elevated. “Taken together, the fiscal deficit is projected to marginally decline to 6.6 per cent of GDP in fiscal year 2020-21,” it adds.
While the government has adopted various relief measures to contain the pandemic, reduce the impact on households and provide economic support to the most vulnerable firms, the report highlights the importance of reforms to support a resilient recovery.
“For a resilient recovery and inclusive growth, economic support measures to firms and workers in the informal sector will be important,” World Bank senior economist and author of the update Dr Kene Ezemenari said, adding that incentives to agribusiness-based and forest-based SMEs, with a focus on returnee migrants and youths, could help increase employment and food security. “Inclusive growth could be further promoted through entrepreneurship support programmes and grants to small and medium enterprises.”
The report also outlines four pillars in the areas of health, social support, economic support and cross-cutting priorities including fiscal sustainability and focus on digital and green economies. This includes measures to strengthen the health system and scale up social protection systems, including the adoption of a social registry to make these systems more resilient against future shocks. Enhanced school sanitation and health protocols including health screening, water and sanitation facilities would be needed to enable a return to schooling for children.
“In the rapidly unfolding global scenario brought by Covid-19, insights from the Nepal Development Update on Nepal’s outlook, challenges and way forward is very helpful,” finance minister Dr Yuba Raj Khatiwada said, after launching the report.
Claiming that the government will achieve the target of 7 per cent economic growth for the current fiscal year, he painted the rosy picture of economy, though the economy has shattered due to the lackdown imposed by the government – to contain Covid-19 spread – from March 24. The service sector that has more than 50 per cent contribution to the economy has bleed red due to the lockdown, which has also pushed a sizable number of population into the poverty trap.
The finance minister, however, boosted that the exports have grown and imports have dropped in the last fiscal year. He also claimed that the government has been successful in budget implementation in the last fiscal year, though the government has transferred money from various funds to meet the revenue target. “We need to address the crisis with macroeconomic and sectoral policy focused on fiscal sustainability, financial sector stability, a digitally-oriented green economy and resilient public services,” he said, appreciating the rapid action taken by the development partners including the World Bank, Asian Development Bank, IMF and others for providing Nepal with tangible resources and support to maintain our fiscal balance and accelerate growth and inclusive development.
Expansionary fiscal and monetary policies will be important in the initial relief stage to support banking sector liquidity and provide relief to households and firms. From restructuring through to resilience, expansionary and monetary policies will help pave the way for strengthening financial sector stability in the long run while also building resilient public services and green growth through sustainable and resilient infrastructure, strengthened solid waste management and air and water pollution control.
Related investments and reforms would be critical to expand coverage of digital services and infrastructure to support e-services and help promote e-commerce. It would also help expand the reach and coverage of mobile banking and digital financial services to underpin development of e-commerce. However, digitisation is also limited across the economy. “Addressing this will require removal of access restrictions to any under-utilised fiber optic backbone managed by the governments and public utilities and the introduction of appropriate rules to manage conditions of access, capacity allocation, and access pricing,” he said, “This would also help expand access in rural and remote areas.”
For Nepal to emerge stronger from the crisis, it is important to adapt quickly to the new reality,” World Bank country director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos said, adding that the World Bank is encouraged to note the early start made by the government with the development of Nepal’s Relief, Restructuring and Resilience plan and are committed to work together with multilateral development banks and development partners in helping the country build back greener and better.
Economic growth is estimated to contract sharply to 2.1 per cent in the fiscal year 2020-21 from the Covid-19 pandemic and related lockdown, despite efforts by the government to curb the economic fallout from the crisis, reads the World Bank’s latest Nepal Development Update (NDU). Transitioning the economy from the relief stage through to restructuring and resilient recovery requires a strategic approach to get the country back on a sustainable and inclusive growth path, it reads, adding that the economic activity in the tourism sector will remain weak and remittances inflows will be moderate. “Supply chain disruptions will keep industrial and agricultural production low.”
Likewise, low economic activity and oil prices will also keep imports low and below the pre-crisis levels, leading to a projected narrowing of the current account deficit to 6.5 per cent of GDP, it adds. “Lower imports will continue to limit revenue collection.”
However, fiscal measures announced as part of the fiscal year fiscal year 2020-21 budget, including a revision of custom duties, will provide some support to the budget as spending levels on relief and recovery efforts remain elevated. “Taken together, the fiscal deficit is projected to marginally decline to 6.6 per cent of GDP in fiscal year 2020-21,” it adds.
While the government has adopted various relief measures to contain the pandemic, reduce the impact on households and provide economic support to the most vulnerable firms, the report highlights the importance of reforms to support a resilient recovery.
“For a resilient recovery and inclusive growth, economic support measures to firms and workers in the informal sector will be important,” World Bank senior economist and author of the update Dr Kene Ezemenari said, adding that incentives to agribusiness-based and forest-based SMEs, with a focus on returnee migrants and youths, could help increase employment and food security. “Inclusive growth could be further promoted through entrepreneurship support programmes and grants to small and medium enterprises.”
The report also outlines four pillars in the areas of health, social support, economic support and cross-cutting priorities including fiscal sustainability and focus on digital and green economies. This includes measures to strengthen the health system and scale up social protection systems, including the adoption of a social registry to make these systems more resilient against future shocks. Enhanced school sanitation and health protocols including health screening, water and sanitation facilities would be needed to enable a return to schooling for children.
“In the rapidly unfolding global scenario brought by Covid-19, insights from the Nepal Development Update on Nepal’s outlook, challenges and way forward is very helpful,” finance minister Dr Yuba Raj Khatiwada said, after launching the report.
Claiming that the government will achieve the target of 7 per cent economic growth for the current fiscal year, he painted the rosy picture of economy, though the economy has shattered due to the lackdown imposed by the government – to contain Covid-19 spread – from March 24. The service sector that has more than 50 per cent contribution to the economy has bleed red due to the lockdown, which has also pushed a sizable number of population into the poverty trap.
The finance minister, however, boosted that the exports have grown and imports have dropped in the last fiscal year. He also claimed that the government has been successful in budget implementation in the last fiscal year, though the government has transferred money from various funds to meet the revenue target. “We need to address the crisis with macroeconomic and sectoral policy focused on fiscal sustainability, financial sector stability, a digitally-oriented green economy and resilient public services,” he said, appreciating the rapid action taken by the development partners including the World Bank, Asian Development Bank, IMF and others for providing Nepal with tangible resources and support to maintain our fiscal balance and accelerate growth and inclusive development.
Expansionary fiscal and monetary policies will be important in the initial relief stage to support banking sector liquidity and provide relief to households and firms. From restructuring through to resilience, expansionary and monetary policies will help pave the way for strengthening financial sector stability in the long run while also building resilient public services and green growth through sustainable and resilient infrastructure, strengthened solid waste management and air and water pollution control.
Related investments and reforms would be critical to expand coverage of digital services and infrastructure to support e-services and help promote e-commerce. It would also help expand the reach and coverage of mobile banking and digital financial services to underpin development of e-commerce. However, digitisation is also limited across the economy. “Addressing this will require removal of access restrictions to any under-utilised fiber optic backbone managed by the governments and public utilities and the introduction of appropriate rules to manage conditions of access, capacity allocation, and access pricing,” he said, “This would also help expand access in rural and remote areas.”
For Nepal to emerge stronger from the crisis, it is important to adapt quickly to the new reality,” World Bank country director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos said, adding that the World Bank is encouraged to note the early start made by the government with the development of Nepal’s Relief, Restructuring and Resilience plan and are committed to work together with multilateral development banks and development partners in helping the country build back greener and better.
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