While the government has projected an economic growth rate of six percent for the current fiscal year, it is likely to achieve even half of the target.
The government through the budget announcement for the fiscal year 2023/24 had projected to achieve the growth rate of six percent. However, the World Bank (WB) in its report unveiled on Tuesday has mentioned that Nepal will achieve an economic growth rate of only 3.3 percent by the end of the current fiscal year.
Likewise, the National Statistics Office (NSO) has also estimated that the growth rate of the country in the second quarter (between mid-October and mid-January) at just four percent. The figure was 3.2 percent in the first quarter.
The NSO has attributed the slow growth of the economy to the country’s crawling business sector in the second quarter. In its preliminary report, the statistical authority showed only 0.5 percent growth in the business sector. “A decline in the imports of the business related goods resulted in the slow growth of the sector in the review period,” reads the NSO report.
Likewise, pathetic performance of the country’s manufacturing sector also affected the overall growth of the economy. According to the NSO, the manufacturing sector witnessed negative growth of 0.4 percent in the review period. The manufacturing sector this year has been adversely affected by fall in aggregate demand and inadequate electricity supply, among others.
In the review period, households and edibles related sectors grew by 29.3 percent, while electricity and gas usage grew 17.1 percent. Similarly, the transport and storage segments also expanded 14.3 percent. An increase in banks’ deposit and lending was attributed to the growth of the financial and insurance sector by 9.1 percent.
At present, the primary sector that includes agriculture, fisheries and mines contributes 24.6 percent to the country’s gross domestic product (GDP). The secondary sector including manufacturing, electricity and gas contributes 12.9 percent, while the service related businesses have 62.4 percent shares in the GDP.
In the second quarter, the growth of the agriculture sector was estimated to stand at three percent. It is mainly due to a notable increase in paddy production in the current fiscal year, according to the NSO.
On the other hand, the WB has said that Nepal’s economy is expected to grow by 3.3 percent in 2024, driven by revived tourism and a pickup in hydropower exports. The multilateral financial institution has sought the country’s growth to propel by private consumption supported by a substantial increase in remittance inflows.
The WB however has cautioned that the projected growth rate could be affected by multiple risks, including a growth slowdown in partner countries, notably India, the Gulf countries, and Malaysia which could lead to a drop in remittances and tourism.
