Nepal will witness a growth of 4.5 per cent in the current fiscal year due to the hope that the peace process will be concluded and also normal weather conditions have boosted agriculture production, according to a report released here today by the Asian Development Bank (ADB).
However, growth will slow down to four per cent in the next fiscal year which is around the speed limit for an economy inhibited by long-standing structural bottlenecks and policy issues, said the Asian Development Outlook 2012.
"The improvement from a year earlier will come from faster growth in agriculture and services," it said, adding that strong remittance and rebounding tourism earnings — foreshadowed in the early months of the fiscal year — will buttress services. "With no improvement expected in power supply, industrial performance will, however, remain sluggish."
The expansion of agriculture in the last fiscal year 2010-11 and the current fiscal year 2011-12 reflected a recovery that provided a fillip to growth in the sector and to gross domestic product but that upturn masks deep-seated problems in raising low productivity and growth to the sector’s higher potential, the annual flagship publication of the ADB said, adding that inflation gently declined in the first half of the current fiscal year pointing to an annual average of eight per cent.Food inflation has been on check from better harvests as well as mitigated global price pressures.
The high base effect of the previous year and supportive monetary policies will also keep price rises down. Despite pressure from needed upward revisions in fuel prices, inflation is expected to ease to seven per cent in the next fiscal year, broadly in line with India’s, it projected, hoping that the central bank will maintain its focus on encouraging financial sector consolidation, reforming poorly performing banks, enhancing financial inclusion, and strengthening its own supervisory capacity. "Managing the liquidity of commercial banks will still remain tricky with a need to strike a balance between containing inflation and supporting growth," it said.
The trade deficit will widen over the next two years, with faster growthin imports than exports spurred by sustained high oil prices, and bya rise in non-oil imports. "Yet, the current account is projected to moveto a surplus owing to stronger remittance and tourism receipts. Remittance will accelerate because of the high number of migrant workers going for foreign jobs last year and wage increments in destination countries; tourism receipts are on the rise, apparently reflecting the delayed impact of the Nepal Tourism Year campaign," according to the report.
This fiscal year saw timely budget for the first time since the Constituent Assembly elections in 2008. "But still the government faces an uphill task in fiscal management," the report suspected, suggesting the government to create a fiscal cushion, and bring the informal sector into the formal tax base.
"Expanding the tax base is necessary to reduce dependence on foreign aid, which finances about three-fifths of government capital spending," said country director of ADB for Nepal Kenichi Yokoyama launching the report.
Politically induced market distortions are a challenge the country will have to face, as in recent years, the economy has suffered from several market distortions, originating mainly in the fragile political environment and compounded by poor law enforcement.
In the last fiscal year, growth slowed down to 3.5 per cent on weaker remittance inflows, a downdraft in real estate, fuel and power shortages, and continued political uncertainty, it said, adding that inflation hovered around the double-digit threshold, and the banking system came under stress.
Showing posts with label Asian Development Outlook. Show all posts
Showing posts with label Asian Development Outlook. Show all posts
Wednesday, April 11, 2012
Rich-poor gap widening in Asia: ADB
Both the communist China and democratic India are witnessing a similar syndrome; a widening rich-poor gap, according to a new report from the Asian Development Bank (ADB) released today.
The Gini coefficient – a key measure of inequality – grew in People’s Republic of China (PRC) to 43 from 32 and in India to 37 from 33 between the early 1990s and around 2010. "Considering the region as a single unit, the Gini coefficient has leapt from 39 to 46 in the last two decades," the ADB's flagship publication revealed.
"Asia’s rapid growth is leaving millions behind, causing a widening gap between rich and poor that threatens to undermine the region’s stability," it said, adding that another 240 million people could have been lifted out of poverty over the past 20 years, if inequality had remained stable instead of increasing as it has since the 1990s.
The Asian Development Outlook 2012 — ADB’s annual flagship economic publication — reported that income divisions are rising markedly in the region, where the richest one per cent of households account for six per cent to eight per cent of total income. "Close to 20 per cent of total income went to the wealthiest five per cent in most countries," said the report revealing that the share of income accruing to the richest households has increased over time.
Unequal access to education, health and other public services contributes greatly to growing inequalities, further hindering opportunities for the poor to raise their living standards. School drop-out rates are up to five times higher for children in the poorest families, while the chance of a poor infant dying at birth can be 10 times higher than those of a child born to a rich family.
"Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families," according to ADB's chief economist Changyong Rhee.
Highly uneven distribution of new technology, infrastructure and investment is further fueling the divide, particularly between rural and urban areas, and coastal and inland provinces. In China, rural-urban and interprovincial differences account for the bulk of inequality.
In spite of developing Asia’s great success in raising living standards and reducing poverty, swelling income disparities threaten to undermine the pace of progress, it said, suggesting the regional policy makers to ensure that the benefits of growth are widely shared.
"Skill premiums have risen in many countries, and better educated workers are enjoying much higher income growth," the report said, adding that technological progress favours capital over labour, with the share of labour income in gross domestic product (GDP) declining and that of capital increasing in many countries. "The abundance of labour relative to capital in the region is also a contributing factor to the declining labour income share.
"Governments need to focus on policy options for reducing inequality, the report suggested. "These include the creation of quality jobs, increased spending on education and health, and expanding social protection including conditional cash transfers for the poor," it said.
"Other key policy options include switching fiscal spending from untargeted price subsidies like on fuel, to targeted transfers, greater and more equitable revenue mobilisation and more investment in infrastructure to reduce imbalances between developed and lagging regions."
The flagship publication of the ADB also provides a comprehensive analysis of economic performance for the past year and offers forecasts for the next two years for the 45 economies in Asia and the Pacific that make up developing Asia.
Despite weak global demand, Asian Development Outlook 2012 expects that developing Asia will largely maintain its growth momentum in the next couple of years, in an environment of easing inflation for most regional economies, although policy makers must be alert to further oil-price spikes arising from threats of oil supply disruptions.
The report sees that the greatest risk to the outlook is the uncertainty surrounding the resolution of sovereign debt problems in the eurozone. Still, in the absence of any sudden shocks, developing Asia can manage the effects on its trade flows and financial markets.
The Gini coefficient – a key measure of inequality – grew in People’s Republic of China (PRC) to 43 from 32 and in India to 37 from 33 between the early 1990s and around 2010. "Considering the region as a single unit, the Gini coefficient has leapt from 39 to 46 in the last two decades," the ADB's flagship publication revealed.
"Asia’s rapid growth is leaving millions behind, causing a widening gap between rich and poor that threatens to undermine the region’s stability," it said, adding that another 240 million people could have been lifted out of poverty over the past 20 years, if inequality had remained stable instead of increasing as it has since the 1990s.
The Asian Development Outlook 2012 — ADB’s annual flagship economic publication — reported that income divisions are rising markedly in the region, where the richest one per cent of households account for six per cent to eight per cent of total income. "Close to 20 per cent of total income went to the wealthiest five per cent in most countries," said the report revealing that the share of income accruing to the richest households has increased over time.
Unequal access to education, health and other public services contributes greatly to growing inequalities, further hindering opportunities for the poor to raise their living standards. School drop-out rates are up to five times higher for children in the poorest families, while the chance of a poor infant dying at birth can be 10 times higher than those of a child born to a rich family.
"Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families," according to ADB's chief economist Changyong Rhee.
Highly uneven distribution of new technology, infrastructure and investment is further fueling the divide, particularly between rural and urban areas, and coastal and inland provinces. In China, rural-urban and interprovincial differences account for the bulk of inequality.
In spite of developing Asia’s great success in raising living standards and reducing poverty, swelling income disparities threaten to undermine the pace of progress, it said, suggesting the regional policy makers to ensure that the benefits of growth are widely shared.
"Skill premiums have risen in many countries, and better educated workers are enjoying much higher income growth," the report said, adding that technological progress favours capital over labour, with the share of labour income in gross domestic product (GDP) declining and that of capital increasing in many countries. "The abundance of labour relative to capital in the region is also a contributing factor to the declining labour income share.
"Governments need to focus on policy options for reducing inequality, the report suggested. "These include the creation of quality jobs, increased spending on education and health, and expanding social protection including conditional cash transfers for the poor," it said.
"Other key policy options include switching fiscal spending from untargeted price subsidies like on fuel, to targeted transfers, greater and more equitable revenue mobilisation and more investment in infrastructure to reduce imbalances between developed and lagging regions."
The flagship publication of the ADB also provides a comprehensive analysis of economic performance for the past year and offers forecasts for the next two years for the 45 economies in Asia and the Pacific that make up developing Asia.
Despite weak global demand, Asian Development Outlook 2012 expects that developing Asia will largely maintain its growth momentum in the next couple of years, in an environment of easing inflation for most regional economies, although policy makers must be alert to further oil-price spikes arising from threats of oil supply disruptions.
The report sees that the greatest risk to the outlook is the uncertainty surrounding the resolution of sovereign debt problems in the eurozone. Still, in the absence of any sudden shocks, developing Asia can manage the effects on its trade flows and financial markets.
Wednesday, September 14, 2011
South Asia's growth to slow down
Growth in South Asia is slowing this year as monetary authorities move to combat still high levels of inflation, according to Asian Development Outlook Update 2011 released today.
The gross domestic product (GDP) is expected to expand by 7.2 per cent, with the inflation forecast marked up to 9.1 per cent. Next year growth should pick up to 7.7 per cent, led by India, after higher interest rates crimped consumer spending and investment in 2011, the report said.
The Asian Development Bank (ADB) has cut its 2011 and 2012 growth forecasts for developing Asia amid ongoing worries about weak external demand from its key trading partners.
It has also trimmed its full year forecast to 7.5 per cent from 7.8 per cent seen in April. The 2012 projection is also lowered slightly to 7.5 per cent from 7.7 per cent previously.
Asian Development Outlook and Asian Development Outlook Update are ADB’s flagship economic reports analysing economic conditions and prospects in Asia and the Pacific, and are issued in April and September, respectively.
The slowdown in demand from the US and Europe continues to cast a cloud over the region, with export growth easing substantially in the second quarter of 2011 in leading economies, including the People’s Republic of China (PRC).
"At the same time, strong domestic consumption and expanding intraregional trade are helping to underpin still solid growth levels,” said Changyong Rhee, ADB’s Chief Economist. "Since the onset of the global recovery, the growth in exports to the PRC from several Asian economies has been stronger than their exports to the rest of the world."
The share of intraregional exports among the largest economies in the region has increased from 42 per cent in 2007 to 47 per cent in the first half of 2011, the report noted.
Accelerating price pressures remain a threat to many economies, with the inflation rate for developing Asia expected to average 5.8 per cent this year, up from an April projection of 5.3 per cent. The rate should cool in 2012 to 4.6 per cent as commodity prices recede but central banks will still need to keep a close watch and may need to take remedial action.
Capital continues to flow into the region, although the pace has eased in recent months, and remains at manageable levels. However policy makers should be prepared to act in the event of any upsurge in capital volatility once the US and European debt markets settle and advanced economies pick up again.
The report notes that many economies in the region are well placed to cope with soft global economic conditions for a while, provided the major industrial economies do not fall back into recession.
"Ample fiscal space, even after the recent spate of fiscal stimulus measures, and large foreign reserves provide a buffer against further downside risks,” Rhee said.In the longer term, the region must press forward with structural reforms that encourage domestic-led, inclusive growth, as demand from advanced countries is likely to remain subdued.
East Asia remains the key economic driver for developing Asia with expected growth of 8.1 per cent this year, although more moderate activity in the PRC has seen the forecast trimmed from the April estimate of 8.4 per cent.
Next year, a further easing of growth in the PRC will see overall growth for the five economies dip further to eight per cent.
The gross domestic product (GDP) is expected to expand by 7.2 per cent, with the inflation forecast marked up to 9.1 per cent. Next year growth should pick up to 7.7 per cent, led by India, after higher interest rates crimped consumer spending and investment in 2011, the report said.
The Asian Development Bank (ADB) has cut its 2011 and 2012 growth forecasts for developing Asia amid ongoing worries about weak external demand from its key trading partners.
It has also trimmed its full year forecast to 7.5 per cent from 7.8 per cent seen in April. The 2012 projection is also lowered slightly to 7.5 per cent from 7.7 per cent previously.
Asian Development Outlook and Asian Development Outlook Update are ADB’s flagship economic reports analysing economic conditions and prospects in Asia and the Pacific, and are issued in April and September, respectively.
The slowdown in demand from the US and Europe continues to cast a cloud over the region, with export growth easing substantially in the second quarter of 2011 in leading economies, including the People’s Republic of China (PRC).
"At the same time, strong domestic consumption and expanding intraregional trade are helping to underpin still solid growth levels,” said Changyong Rhee, ADB’s Chief Economist. "Since the onset of the global recovery, the growth in exports to the PRC from several Asian economies has been stronger than their exports to the rest of the world."
The share of intraregional exports among the largest economies in the region has increased from 42 per cent in 2007 to 47 per cent in the first half of 2011, the report noted.
Accelerating price pressures remain a threat to many economies, with the inflation rate for developing Asia expected to average 5.8 per cent this year, up from an April projection of 5.3 per cent. The rate should cool in 2012 to 4.6 per cent as commodity prices recede but central banks will still need to keep a close watch and may need to take remedial action.
Capital continues to flow into the region, although the pace has eased in recent months, and remains at manageable levels. However policy makers should be prepared to act in the event of any upsurge in capital volatility once the US and European debt markets settle and advanced economies pick up again.
The report notes that many economies in the region are well placed to cope with soft global economic conditions for a while, provided the major industrial economies do not fall back into recession.
"Ample fiscal space, even after the recent spate of fiscal stimulus measures, and large foreign reserves provide a buffer against further downside risks,” Rhee said.In the longer term, the region must press forward with structural reforms that encourage domestic-led, inclusive growth, as demand from advanced countries is likely to remain subdued.
East Asia remains the key economic driver for developing Asia with expected growth of 8.1 per cent this year, although more moderate activity in the PRC has seen the forecast trimmed from the April estimate of 8.4 per cent.
Next year, a further easing of growth in the PRC will see overall growth for the five economies dip further to eight per cent.
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