“One of our major concerns is that businesses could fail to pay their loans and the loans will turn into bad debts, as most of them have already been affected,” said Ashoke Rana, chief executive officer of Himalayan Bank. “Business is down due to fear, but the consequences will be more severe if the country sees the spread of the virus.”

According to Nepal Rastra Bank, banks and financial institutions had a loan exposure of Rs3.18 trillion as of mid-February, and overall non-performing loans (loan amount missing the repayment deadline) was just 1.77 percent.

Bankers say they are already seeing a sharp drop in loan demand, and fewer people are visiting banks amid coronavirus fears. “We ourselves prefer that customers do not visit the banks for the sake of the safety of our staff,” said Rana.

Another concern for banks is the foreign labour market as both Nepal and the labour destination countries have stopped travel of migrant workers.

With businesses shutting down in labour destinations, there is a likelihood of migrant workers losing their jobs. This will affect remittance inflows in Nepal, one of the important sources of bank deposits and which account for around 26 percent of the GDP.

Remittance, tourism and exports are the major sources of foreign exchange earnings for Nepal.

A slump in remittance could also lead to a contraction of economic activities as the recipient families mostly spend the money on consumption, education of their children and building houses.

“So, potential disturbances in foreign labour markets will have consequences on the livelihoods of many people in the country,” said economist Raghubir Bista. “There is no space in the country to provide employment for returnees from foreign employment.”

Since many people spend most of the remittance in the market, a drop in the flow will have a direct impact on the demand for goods and services, economists say.

It is just a matter of time before the effect of the pandemic on remittance inflows is seen, according to them. In the first six months of the current fiscal year, the country saw remittance inflows increase by 0.9 percent to Rs447 billion.

Crowds are starting to thin at the markets due to coronavirus fears. People are avoiding going to restaurants and shops, and the decrease in people’s movement can be gauged from the shrinking vehicular traffic on Kathmandu’s roads.

Besides wholesale, retail and tourism, the manufacturing sector too is facing a shortage of raw materials. The export industry is having a hard time shipping goods to markets like Europe, the United States and China due to supply chain disruptions.

The carpet industry is one of the sectors facing headwinds from the coronavirus crisis. “We have not been able to export the carpets that have been packed and readied for shipment,” said Hari Bahadur Jyu Thakuri, senior vice-president of Nepal Carpet Manufacturer and Exporter Association.

“We are also not getting wool from the Tibet Autonomous Region of China as the borders between the two countries are closed.”

According to the association, the US is the largest market for Nepali carpets followed by Europe while China is emerging as a lucrative market.

In the last fiscal year, Nepal exported carpets worth Rs7.16 billion to third countries other than India and China. The northern neighbour bought carpets valued at Rs195 million, according to Nepal Rastra Bank data.

Last week, Dharma Raj Shakya, immediate past president of the Federation of Handicraft Associations of Nepal, told the Post that handicraft exports had largely stalled with monthly shipments barely totalling Rs1 million to Rs1.5 million. According to the federation, the country exports handicrafts worth around Rs6 billion annually.

Domestic market-based industries seem to be more resilient than export-based industries. Manufacturers say they are using the raw materials remaining in their stocks.

Pharmaceutical industries said they have stocks of medicines to last them a few months after India banned exports of a number of medicines.

“There is no need to panic with regard to medicines as we have adequate stocks of raw materials, and the market has inventories enough for a few months,” said Hari Bhakta Sharma, managing director of Deurali Janata Pharmaceutical Company.

The scale of the impact of the current pandemic will depend on how long it continues. The longer Europe and America struggle, the worse it will be for the global economy, and Nepal is certain to feel knock-on effects.

The government, which is struggling to put in place measures to prevent the virus from spreading, needs to set its priorities right, said observers. Only one case has been reported in Nepal so far, and the patient recovered too.

If the crisis deepens across the globe, the government will be faced with multiple challenges. In the event of shortages of daily essentials, its response should be swift and robust, and it needs to work in tandem with the private sector, analysts said. The private sector, on its part, will need to come up with its own plan of action.

Experts say there is no way to predict what shape the problem may take, but the government and the private sector must chalk out some immediate measures. Economist Bista said that both sides should work together to ensure that daily essentials are available to the public at affordable prices.

“People who may lose their jobs due to the impact of coronavirus will be hurt harder economically,” said Bista. “Maintaining supply and controlling prices will be a great relief for them.”

Although the Federation of Nepalese Chambers of Commerce and Industry appealed to traders to sell goods transparently, people are finding it hard to get cooking gas in the market.

With the country being prone to supply disruptions due to its heavy dependence on imports, he urged the government to take measures that will promote domestic production.

Economist Shankar Sharma recommended a series of short- and medium-term measures to tackle the economic impact of coronavirus.

“Right away, the government can slash the customs duty on raw materials required for manufacturing industries. And for airlines facing hard times due to coronavirus, the government can cut parking fees,” said Sharma.

“In the medium term, there should be loan rescheduling for affected industries and subsidised loans for small and medium scale enterprises.” He also stressed the need to introduce measures to help people who become jobless due to the pandemic.