Nepal’s growth likely to hit reverse gear this fiscal: NRBNepal’s economy may witness a negative growth this fiscal year as economic activities have been adversely affected due to an unofficial trade embargo imposed by India
Nepal’s economy may witness a negative growth this fiscal year as economic activities have been adversely affected due to an unofficial trade embargo imposed by India, delayed post-earthquake recovery works and poor monsoon, a senior Nepal Rastra Bank (NRB) official said.
Painting a gloomy picture of economy in its latest monthly assessment of the economy, the central bank has also made it clear that the growth target of 6 percent is less likely this fiscal. After the devastating April 25 earthquake, Nepal’s major trade lifeline has been reeling under the Tarai unrest for nearly three months and the trade blockade for over a month.
Nara Bahadur Thapa, chief of research department at the NRB, said almost all sectors of economy are likely to see a negative growth this fiscal year. “Except agriculture, none of the sub-sectors under the non-agriculture sector is likely to witness growth this fiscal year,” said Thapa, adding that the economic growth may be negative if the current situation prolongs.
The agriculture sector, which contributes one third to the economy, has also suffered from very low rainfall (81. 9 percent of last 30 year’s average rainfall from August 18 to September 17), shortage of chemical fertilizers, pesticides and impended market access of agriculture products due to strike and blockade on trade routes.
Economic activities have remained sluggish over the last six months ever since the country faced the deadly earthquake. The country’s business community has said that the impact of Tarai banda and Indian embargo has become more severe with a daily loss of Rs2 billion for nearly three months. On the other hand, little has been done towards reconstruction and works in many hydropower projects damaged by the April 25 earthquake and its aftershocks have not resumed yet, the central bank said.
The severity of Indian embargo can be felt with the fact that the country witnessed a decrease in trade deficit with the dip in imports. The exports which have remained sluggish in the recent years, also witnessed a decline.
As per the latest monthly macro-economic report published by the central bank, the trade deficit decreased by 17.8 percent to Rs 91.71 billion during the first two months of the current fiscal year against the rise of 24.9 percent during the same period last fiscal year. “Trade deficit decreased for the first time in many years,” said Thapa. “Nepal’s imports might have decreased probably for the first time.”
According to the NRB, imports decreased by 17.5 percent to Rs103.95 billion, while exports also declined by 15.2 percent to Rs12.24 billion.
Due to Indian embargo and obstruction of of the main trade route by Madhesi protesters, there have been little imports from southern borders in the recent months, while the main trade route with China—Araniko Highway—has also remained closed. Another trade route in the north—Kathmnandu-Rasuwagadhi—has just resumed after the devastating earthquake.
The decrease in imports has compounded the economic woes, with the industries reeling in the absence of raw materials.