GDP plummets, inflation soars

Capital expenditure only 10 per cent

Kathmandu, May 26: `With the Gross Domestic Product (GDP) growth rate plummeting below one per cent and inflation rate soaring to double digit, the Economic Survey of Fiscal Year 2015/16 painted a bleak economic scenario of the country.

The GDP growth in basic price would be 0.77 per cent in the current fiscal which was 2.32 per cent in the last fiscal and 5.7 per cent in the Fiscal Year 2013/14.

"Devastating earthquakes in April and May, low growth in agriculture sector, and obstructions at the southern border points hit hard the economy, resulting in the lowest economic growth rate in the last 14 years," said Finance Minister Bishnu Prasad Poudel while presenting the Survey at the Legislature-Parliament on Thursday.

Although the governments then and now had claimed to achieve economic growth by about 6 per cent in the back of massive investment in the reconstruction of the houses and other infrastructure damaged in the earthquake, the five-month long Indian dealt a blow to this projection.

The reconstruction works could not gain momentum owing to short supply of fueld and other required materials.

The government forecasted the macroeconomic indicators on the basis of eight months data of the current fiscal year which is compared against the same period of the last fiscal.

The survey projected that the agriculture sector would see growth at the rate of 1.30 per cent in the current fiscal against the 0.80 per cent of the last fiscal and service sector would grow by 2.70 per cent compared to 3.60 per cent last year.

But the manufacturing sector has been estimate to have negative growth rate of -6.3 per cent. I's growth rate in the last fiscal was 1.5 per cent.

"Inflation rose by more than 3 per cent compared to that of last year. Inflation rate in 2016 March was 10.2 per cent which was 7 per cent in the same period last year," said Minister Poudel.

Because of the Indian blockade, export dipped by -13 per cent and export-import ratio went further down from last year's 11 per cent to 9.4 per cent this year. Energy crisis, earthquake and scarcity of skilled human resources also contributed to the decline of export business.

In the first eight months of the current FY, government's expenditure stands at Rs. 268 billion out of total Rs. 819.4 billion. It is 22.69 per cent less than the same period of the last fiscal.

Capital expenditure stands at 10.18 per cent of total allocated budget while general expenditure reached 73.87 per cent and expenditure for financial management is about 15.95 per cent.

Bank and financial institutions loan mobilization increased by 8.4 per cent in the first eight month of the current fiscal as compared to the same period last year and reached Rs. 1830.6 billion, read the Economic Survey report.

According to the government forecasts, yield of major agricultural items like rice, wheat, maize and millet would be decreased by 6 per cent as compared to the last fiscal year and the total production of such crops would be 8,692,000 metric tons.

Macroeconomic indicators and their annual change percent

Index	2013/14	2014/15	2015/16
GDP	5.7	2.32	0.77
Consumer Price	9.1	7.2	9.5
Revenue	20.5	13.7	13.5
Capital expenditure	22.2	33.1	79.2
Regular expenditure	8.3	26.5	27.9
Export	17.4	-7.3	-13.0
Import	27.3	8.4	2.0
Export-Import Ratio	12.4	11.0	9.4
Trade deficit	29.7	10.8	3.8
Current account balance (Rs. in billions)	89.7	108.3	141.9
Per capita national income (USD)	737	775	766
Remittance (Rs. in billions)	543.3	617.3	679.0
Balance of Payment (Rs. in billions)	127.1	145.0	161.0

Source: Economic Survey 2015/16

Major challenges to the economy

Finance Minister Bishnu Prasad Paudel has listed 10 challenges to the country's economy.

He said that achieving high growth trajectory by mobilizing internal and external resources in the reconstruction of the quake damaged structures would be challenging.

Likewise, modernization and commercialization of agriculture, increasing productivity, market and value chain development and irrigation will be a challenge.

"Attracting foreign and domestic investment and expediting the industrialization process in the leadership of private sector is challenging. So is resolving the energy crisis in the country," said the Minister.

According to Poudel, tourism infrastructure development, enhancing capital expenditure capacity and promoting transparency, creating employment and channeling remittance to the productive sector and bringing the informal businesses in to the formal economy were equally challenging.