Kathmandu, May 2
Nepal’s Gross Domestic Product (GDP) is estimated to shrink to the rate of 2.2 per cent (at nominal prices) in the current Fiscal Year 2022/23, indicating that the country could be pushed into another round of economic recession.
The economy would expand by 1.6 per cent at consumer prices.
According to the National Statistics Office (NSO) – the statistical agency under the Prime Minister’s Office, the economic growth this year would remain much below the earlier projections made by the government and international agencies.
The estimate is way below the government projection of 8 per cent as announced in the budget speech. “I expect economic growth to be 8 per cent in the next fiscal year attributed to mobility in the economy, economic revival, encouraging private sector investment and the investment made by the government in economic and social sectors,” then Finance Minister Janardan Sharma had said in his budget speech.
However, the country failed to achieve anything that as announced the then the finance minister. It was a turbulent year with increasing distrust among the political parties, as well as the government, private sector and consumers.
Nepal saw six finance ministers in the past nine months of the current fiscal year including prime ministers holding the portfolio at least three times. Janardan Sharma presented the budget but was forced to resign amidst the allegations of tampering by external individuals with the tax rates, however, the court reinstated him.
After the general election, Bishnu Prasad Paudel of the CPN-UML became the FM but he had to resign as the leader of the ruling coalition CPN (Maoist Centre) forged collaboration with Nepali Congress, which made way for Dr. Prakash Sharan Mahat to become the finance minister.
The projected growth rate is about a half compared to the estimates of 4.1 per cent made by the multilateral donors – Asian Development Bank (ADB) and World Bank (WB).
The 2.2 per cent economic growth is among the lowest four instances in the last 25 years. In 2015/16, when a powerful earthquake of 7.9 magnitude hit the country, Nepal witnessed a zero growth while it saw a massive loss with -2.4 per cent during the first wave of COVID-19 pandemic in 2019/20.
The quake coupled with the Indian blockade in 2015/16 had distressed the economy but the massive reconstruction activities and job creation created an environment of high growth trajectory until 2018/19 and the growth rate remained above 6.4 per cent for three years.
The economic growth in 2002 and 1987 was also one of the lowest. Nepal’s average GDP growth rate hovers around 4 per cent annually.
While the government every year exaggerates the growth rates and later corrects it, the evidence during the coronavirus pandemic could be identical this year as well. The statistical office amidst the pandemic had raised the hopes and estimated the GDP growth of 2.27 per cent in 2019/20 but it went negative by 2.4 per cent.
According to the NSO, as it informed in a press meet organised on Tuesday, that no any shock is expected in coming months and economic activities are assumed to slightly increase in coming months compared to last eight months.
Size of Nepal’s economy by the end of this fiscal in mid-July 2023 would be Rs. 5381 billion. The NSO has revised the last year’s growth rate to 4.49 per cent from the earlier estimates of 5.26 per cent.
Sector-wise growth
All three major sectors of the economy are projected to witness a recession this year compared to previous two years, with agriculture being an exception.
Gross Value Addition (GVA) of the primary sector (comprising agriculture and forestry) will grow by 2.69 per cent against 2.39 per cent of previous year 2021/22 and 2.89 per cent of 2020/21. Decrease in the production of dry-season crops, milk and eggs has barred this sector from achieving the higher growth, NSO reported. This sector will contribute 24.6 per cent to the national economy.
Likewise, secondary sector (comprising manufacturing, energy, water and regeneration) will contribute 12.9 per cent to the economy this year. It will grow by only 0.56 per cent against that of 10.89 per cent of last fiscal and 7.06 per cent of 2020/21.
Similarly, tertiary sector (comprising wholesale and retail trade, accommodation, food, transportation, real estate, health, education and other services) will contribute 62.4 per cent to the economy. This sector will grow by 2.33 per cent, much lower than 5.32 per cent of 2021/22 and 4.71 per cent of 2020/21.
Value addition in recession
Three major components of the national economy – manufacturing, construction, and wholesale and retail trade - are estimated to witness a loss of more than 2 per cent in their value addition. The NSO informed on Tuesday that the Gross Value Addition (GVA) rate for manufacturing is projected at -2.04 per cent, construction -2.62 per cent and wholesale and retail trade -2.96 per cent.
As per the statistics wholesale and retail trade including repair of motor vehicles and motorcycles would see the largest loss among the 18-industrial classification of economic components. They had the GVA rate of 6.74 per cent, 7.08 per cent and 7.46 per cent in the fiscal year 2021/22, NSO informed in its report.
Likewise, the GVA of electricity and gas sector is estimated to come down to 19.36 per cent from 53.35 per cent of last year. The sector to have the highest GVA growth is accommodation and food service which will increase to 18.56 per cent this year from 12.61 per cent of last year.
Per Capita GDP remains stagnant
Meanwhile, the Per Capita GDP is projected to remain at US$1399 at the same point where it was in the last fiscal 2021/22 as well.
The slowdown in various businesses and industrial sectors, loss of jobs and decreased industrial production has pulled the country’s economy back from making progress.
Likewise, the country will see the gross fixed capital formation of Rs. 1356.46 billion 25.1 per cent of GDP), export of 385.1 billion (7.16 per cent of GDP) and import of Rs. 1964.33 billion (36.5 per cent of GDP). The NSO has estimated that the country will receive Rs. 1231.7 billion in remittance (22.89 per cent of GDP) by the end of this fiscal.
Published in The Rising Nepal daily on 3 May 2023.
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