World Bank revises economic growth upward to 5.1 per cent

The World Bank (WB) revised Nepal’s economic growth rate upwards to 5.1 per cent for the current fiscal year 2022-23, which is way higher than the projection of 4.7 per cent estimation of the Asian Development Bank (ADB) and lower than the government projection of 8 per cent.

Unveiling the report ‘Latest Macroeconomic Update,’ the development partner, however, estimated the inflation rate to shoot up. 

The economy might grow higher at the back of a rebound in the tourism to support service sector and strong industrial growth triggered by increased hydroelectricity production, the report reads, adding that the economic growth rate for fiscal year 2023-24 will see 4.9 per cent. “While public debt levels are expected to stabilise and pressure on foreign exchange reserves is projected to ease, Nepal continues to face structural challenges relating to a modernisation of the tax system, the attraction of new sources of foreign exchange (especially FDI) and full implementation of fiscal federalism that need to be addressed to ensure sustainable and inclusive growth.”

The economy is expected to grow, reflecting monetary policy normalisation, the end of pandemic-era monetary support measures, and still relatively high commodity prices, according to the World Bank.

The Nepal Development Update contains a special focus on ‘the Macroeconomic Impacts of Climate Change’. Nepal is highly vulnerable to climate change and must adapt to global warming, even though it is a negligible contributor to global greenhouse gases, the analysis claims, adding that negative impacts are expected to accelerate sharply in the second half of the century, with GDP contracting 24 per cent relative to the baseline projections by 2100. A list of 32 actionable steps that Nepal can take now to reduce these impacts and reinforce its Green, Resilient, and Inclusive Development (GRID) pathway is also provided in the recently released Nepal Country Climate and Development Report. 

“Nepal’s GDP and other macroeconomic losses in the first three decades of the 21st century are small to begin with, but are expected to accelerate quickly in the second half of the century as temperatures and climate events reach higher levels of intensity,” World Bank Country Director for Maldives, Nepal, and Sri Lanka Faris Hadad-Zervos said, adding that these findings underscore the urgency of implementing measures aligned with the country’s GRID pathway, to increase Nepal’s adaptive capacity to climate-related shocks.”