September 21, 2023 | Investopaper
Asian Development Bank (ADB) has forecasted a 4.3 percent economic growth for Nepal in the ongoing fiscal year. This projection indicates an improvement in economic growth compared to the previous fiscal year, a key finding of the ‘Asian Development Outlook, 2023’ report unveiled by the bank recently.
ADB had estimated the economic growth in the last fiscal year to be 1.9 percent and anticipates a positive upswing in the current fiscal year. However, it’s important to note that ADB’s growth forecast falls below the government’s optimistic projection of 6 percent for the current financial year.
Moreover, despite the global surge in oil prices, Nepal is expected to experience a relatively moderate price increase, expected to remain within 6.2 percent during this fiscal year. This expectation is attributed to the decrease in oil prices observed in India, Nepal’s neighboring country.
Notably, ADB’s projection is more conservative than the government’s forecast. ADB predicts a decline in Nepal’s inflation rate from 7.7 percent in the last fiscal year to 6.2 percent in the current fiscal year, aligning more closely with the government’s target of limiting the price increase to 6.5 percent.
ADB emphasizes that inflation is well-managed, and the country’s foreign exchange reserves are at adequate levels, both of which are favorable for economic growth. Nepal Rastra Bank has taken a significant step by reducing the policy rate to 6.5 percent in this fiscal year. This reduction is expected to lower bank interest rates, consequently promoting economic activities.
ADB’s report also highlights positive trends such as an increase in real estate transactions, growth in wholesale and retail trade, and a rise in demand for housing and food, all pointing towards encouraging economic activity.
However, the report also raises concerns about challenges such as decreased agricultural production due to insufficient rainfall during the critical rice planting period and the adverse impact of a cattle epidemic on animal husbandry.
India, Nepal’s neighboring country, witnessed an economic growth of 6.3 percent in the last fiscal year, projected to further increase to 6.7 percent in the current year. In South Asia, the Maldives recorded the highest economic growth at 7.1 percent in the last financial year and is anticipated to maintain a robust growth rate of 6.9 percent in the current year, according to the report.