COVID-19 likely to cause a loss of 168 billion: NRB

Kathmandu, May 27

The Nepal Rastra Bank (NRB) has estimated that the COVID-19 pandemic would have Rs. 168 billion damage to the economy in the current fiscal year 2019/20.

"The NRB has estimated 7 per cent growth for this year but due to coronavirus outbreak, the Central Bureau of Statistics has projected 2.28 per cent growth. It means the country will witness Rs. 168 billion loss," said the central bank in its third quarterly review of the Monetary Policy of FY 2019/20.

While the country was expecting to continue with the high growth trajectory as it achieved in the last three years, the recent health crisis has posed challenges to the management of economy.

"Commodity, labour and financial markets might lose their balance due to the recession in economic activities, shocks in the foreign employment and uneasiness in the supply chain," said the NRB.

Although the monetary expansion was within the expected limit till the end of the third quarter and external sector looked normal, the uncertainty in production and supply management is exerting pressure on food price inflation while there will be pressure on external sector as the major labour markets were badly affected by the pandemic.

The central bank said that the ratio of consumption against the Gross Domestic Product (GDP) would be increased and the former was likely to go up to 81.9 from last years 81 per cent. Likewise, the ratio of national savings and GDP will go down to 46 per cent this year from last year's 48.9 per cent.

Likewise, inflation would cross the earlier projections of 6 per cent as the average inflation rate for the three quarters is 6.5 on an average.

Export trade has increased by 129 per cent and import went down by 7.5 per cent in the review period which narrowed the gap of trade deficit by 8.9 per cent.

The country has foreign reserves enough to cover the import of goods and services for 9.5 months against the monetary policy's target of 7 months.

 Similarly, current account is in Rs. 135.54 billion deficit and balance of payment is in Rs. 36.6 billion surplus. "Increment in export and foreign direct investment, and mobilisation of external loan have contributed in BoP surplus," read the review report.

Published in The Rising Nepal daily on 28 May 2020.