Nepal Economic Digest (July 25, 2020)

Nepal’s growth projected to be tepid at 2.1 percent: World Bank

Economic growth of the country is estimated to contract sharply to 2.1 percent in Fiscal Year 2020/21 from the COVID-19 pandemic and related lockdown, despite efforts by the government to curb the economic fallout from the crisis, states the World Bank’s latest Nepal Development Update.

As a result, transitioning the economy from the relief stage through restructuring and resilient recovery requires a strategic approach to get the country back on a sustainable and inclusive growth path.

The report states that economic activity in the tourism sector will remain weak and remittances inflows will be moderate.

Supply chain disruptions will keep industrial and agricultural production low, says a statement issued by the WB Nepal Office.

Low economic activity and oil prices will also keep imports low and below the pre-crisis levels, leading to a projected narrowing of the current account deficit to 6.5 percent of GDP. Lower imports will continue to limit revenue collection.

However, fiscal measures announced as part of the FY2020/21 budget, including a revision of customs duties, will provide some support to the budget as spending levels on relief and recovery efforts remain elevated.

Taken together, the fiscal deficit is projected to marginally decline to 6.6 percent of GDP in FY2020/21.

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