Kathmandu, March 30 (IANS) The Asian development Bank (ADB) has brought down Nepal’s economic growth outlook to 1.5 percent for the 2015-16 fiscal.
Nepal’s finance ministry had projected around 2 percent economic growth for this fiscal. The Himalayan country is struggling to curb its high inflation rate that hit a record 12.1 percent.
The ADB said there was an urgent need to accelerate reconstruction and implement development programmes to prevent further slowdown in economic growth.
Launching the ‘Asian Development Outlook 2016’ in Kathmandu on Wednesday, the ADB said factors like slow post-earthquake reconstruction, trade and transit disruption due to months-long economic blockade and agricultural troubles owing to unfavourable monsoon contributed to the country’s slow growth rate.
Micro and macro businesses and tourism and service sectors were other key areas hit hard by last year’s earthquake as well as the economic blockade from last September, the bank said.
The Manila-based multinational lender also advised Nepal to speed up steps for political stability and implementation of the new constitution promulgated in September 2015 to ensure higher economic growth.
The ADB projected that Nepal will record two percent economic growth if the reconstruction pace after the April 2015 quake was accelerated.
The total cost of recovery after the quake is estimated at about $7.1 billion (a third of the Gross Domestic Product), including about $5.2 billion to repair buildings and infrastructure and to cover economic losses.
Development partners have since pledged about $4 billion in grants and concessional loans to be disbursed over five years.
On Tuesday, Nepal Prime Minister Khadga Prasad Sharma Oli expressed dissatisfaction over the slow pace of reconstruction.
“At this pace, it will take decades to complete reconstruction,” a visibly angry prime minister said at a meeting called for speeding up reconstruction efforts.
“We will (soon) reach a point where the reconstruction would become a futile exercise because everything will be gone by then. And people will die.”
The five-month embargo at the Nepal-India border points due to political unrest in the southern plains in Nepal contributed to the slow economic growth. Over 10,000 jobs were lost and hundreds of industries shut down.
The bank’s outlook said that in FY2016, a sub-par monsoon will constrain agriculture growth, while an expected delay in getting reconstruction started, coupled with economic dislocation and damage to infrastructure, will curtail industry and growth of services. Accordingly, GDP growth will likely be moderately below the ADB’s 2015 projection.
Inflation is expected to be much higher as price pressures mount owing to an expected drop in agricultural harvest and persistent supply bottlenecks, said the outlook, adding that larger imports combined with a more normal increase in remittances will likely push the current account into a small deficit.
However, the growth rate is expected to pick up to 4.8 percent in 2017 through stabilisation of political climate, acceleration of reconstruction and normal monsoon that favours agricultural growth.
(Anil Giri can be contacted at firstname.lastname@example.org)