Economy to grow by 2.7% this year

Kathmandu, Mar. 31

The World Bank has projected that Nepali economy will grow by 2.7 per cent in the current Fiscal Year 2020/21 and regain momentum in the next couple of years.

The forecast for the current fiscal year is higher than the earlier estimates, according to the South Asia Economic Focus Spring 2021, a report published by the WB on Wednesday.

In January this year, the multilateral donor had put the growth forecast for Nepal for current fiscal at 2.1 per cent. Due to the COVID-19 pandemic, the Gross Domestic Product of the country witnessed a negative growth of 1.9 per cent last year.

Likewise, the projections this time have been raised for the next fiscal years 2021/22 and 2022/23 to 3.9 per cent and 5.1 per cent respectively from earlier 1.4 per cent.

The WB said that the South Asian economies would bounce back but face fragile recovery. Bangladesh will be a leader in terms of growth in the current fiscal year with 3.6 per cent partly supported by its positive growth of 2.4 per cent last year when all other economies witnessed negative growth.

This year, India will have -8.5 per cent loss to its economy but will jump by 10.1 per cent in the next fiscal against the January projections of 1.1 per cent, said the WB

"Prospects of an economic rebound in South Asia are firming up as growth is set to increase by 7.2 per cent in 2021 and 4.4 per cent in 2022, climbing from historic lows in 2020 and putting the region on a path to recovery," read the report.

But growth is uneven and economic activity well below pre-COVID-19 estimates, as many businesses need to make up for lost revenue and millions of workers, most of them in the informal sector, still reel from job losses, falling incomes, worsening inequalities, and human capital deficits, said the World Bank in its twice-a-year-regional update.

The outlook for Bangladesh, Nepal, and Pakistan has been revised upward, supported by better than expected remittance inflows.

"The improved economic outlook reflects South Asian countries’ efforts to keep their COVID-19 caseload under control and swiftly roll out vaccine campaigns. Governments’ decisions to transition from widespread lockdowns to more targeted interventions, accommodating monetary policies and fiscal stimuli—through targeted cash transfers and employment compensation programmes—have also propped up recovery, the report notes," the WB said in a statement.

It suggested that the governments in South Asia need to ramp up investments in human capital to help new generations grow up healthy and become productive workers.

Published in The Rising Nepal daily on 1 April 2021.