Nepal’s economy likely to grow by 4.1% in 2023, WB says

Kathmandu, Apr. 4

Growth in Nepal this year will be slower than previously projected due to the impacts of import restrictions, monetary policy tightening, higher inflation, and shrinking government expenditure reflecting lower government revenue, according to the World Bank’s twice-a-year country update relased on Tuesday. The update is a part of the WB's South Asia Economic Focus.

The latest Nepal Development Update of April 2023 projects Nepal’s economy to grow by 4.1 per cent in FY23, a downward revision from the October 2022 forecast. "Growth is expected to accelerate to 4.9 per cent in the next fiscal year 2023/24, supported by the resumption of tourism, growth in remittances, and the gradual easing of monetary policy," read a statement issued by the WB.

However, it maintained that risks to the outlook are tilted downside and include higher-than-expected inflation, which will dampen consumption and growth, the possible impacts of likely rotations in government officials, and rising inequality from reduced investments in human capital, especially amongst those yet to recover from unemployment following the pandemic.

“Amid measures taken to address pressures on the external sector, the Nepali economy has faced the unintended consequences of slowdown in economic growth and lower fiscal revenue,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. 

Meanwhile, the South Asia Update projected regional growth to average 5.6 per cent in 2023, a slight downward revision from the October 2022 forecast. Regional growth is expected to remain moderate to 5.9 per cent in 2024, following an initial post-pandemic recovery of 8.2 per cent in 2021.

Inflation in South Asia is set to fall to 8.9 per cent this year, and to below 7 per cent in 2024. However, weaker currencies and delayed domestic price adjustments are contributing to a slower than anticipated decline in inflation, read the report.

Elevated global and domestic food prices are contributing to greater food insecurity for South Asia’s poor who spend a larger share of income on food.

Published in The Rising Nepal daily on 5 April 2023.