ADB forecasts 3.6% GDP growth for Nepal in the current fiscal year

Himal Press 11 Apr 2024
ADB forecasts 3.6% GDP growth for Nepal in the current fiscal year

KATHMANDU: Asian Development Bank (ADB) has forecast Nepal’s economy to grow by 3.6% in the current fiscal year.

In its recent Asian Development Outlook, the Manila-based multilateral donor said it expects the lingering weakness in domestic demand that continued in the first quarter of the fiscal year 2023/24 to gradually dissipate in the remainder of the fiscal year as government investment outlays accelerate. “Private consumption expenditure will rise as remittance inflow strengthens and prices moderate, while private investment expenditure will expand on monetary easing and financial sector reforms encouraging term loans,” the ADB added.

The forecast, however, is lower than 4.3% (market prices) that the ADB forecast in September last year.

Earlier, the World Bank said Nepal’s economy will expand by 3.3% this fiscal, while the government has set a growth target of 6% in the current fiscal year.

After contracting by 20.2% in 2022/23 and a slow start in the current fiscal year, the ADB expects public investment to expand by 1.5%. “Overall fiscal policy will support growth despite the deficit being slated to decline to about 3% of GDP from 6.1% in the previous fiscal year. Exports will rise on higher electricity exports as Nepal continues to expand its production and transmission infrastructure,” it added.

According to ADB, merchandise imports, particularly of capital goods, will rise as capital expenditure ramps up, and service imports will rise on higher transport payments and travel costs for Nepalis going abroad. “Gradual relaxation of monetary policy in the current fiscal year and improving consumer and investor confidence will stimulate economic activity,” it added.

Key areas of the economy that contracted in FY2023, notably manufacturing and construction, have begun to expand, and all production sectors are expected to grow in the current fiscal year, the ADB stated in its flagship report. “Industry will grow more rapidly than in the previous fiscal year as capital spending by the government is ramped up in the second half of the fiscal year, and as an additional 900 MW of hydroelectricity comes online by the end of FY2024,” it said. “Service sector growth will also likely accelerate as credit controls ease, interest rates further decrease, and tourism revenues expand. Agriculture growth may increase marginally from 2.7% in the previous fiscal year to 2.8% this year as a record paddy harvest is tempered by a shortfall in winter crops and other agricultural production, given the expectation of deficient rainfall this season.”

The ADB expects Nepal’s GDP to grow by 4.8% in the next fiscal year.

The multilateral donor said in its report that Nepal needs to ramp up its trade facilitation efforts as it graduates from least-developed-country (LDC) status in 2026. “Some reforms have already been implemented since 2003. These reforms have helped align customs policies and legal documents with international best practices, automate some customs procedures, and build capacity in the customs administration,” it added.

Published On: 11 Apr 2024


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