Kathmandu: Nepal’s economy is projected to grow by 2.7 percent in the next fiscal year (FY) 2021/2022, thanks to services in particular in place following the continuous relaxation of social distancing measures and vaccines rolled out for priority populations, according to the World Bank’s latest Nepal development update.
Agriculture is also expected to perform well supported by recent favorable monsoons. Exports could be a powerful platform to boost post-pandemic recovery and enable Nepal to transition towards green, resilient, and inclusive development, said the update unveiled amid an event here on Monday.
The update notes that the tourism sector may not fully recover without reforms to readjust to a post-Covid-19 tourism market. The current account deficit is expected to widen marginally in the FY 2021/22 to 1.2 percent of gross domestic product (GDP) as imports and remittances recover modestly while exports remain apathetic. Revenue performance is also expected to remain weak.
This coupled with additional spending on economic relief measures, vaccinations, and the resumption of project implementation should contribute to increase the fiscal deficit close to 7 percent of GDP in the FY.
While the government has outlined a program to address the impacts of Covid-19 to mitigate the attendant risks to the outlook, the update highlights the importance of improving export competitiveness for a resilient economic recovery.
“Nepal’s untapped export potential is estimated to be around USD 9.2 billion, 12 times its actual annual merchandise exports,” said Dr Kene Ezemenari, World Bank Senior Economist and lead author of the update.
“This export potential represents an opportunity to create an estimated 220,000 new jobs, with significant implications for productivity growth realizing that potential is not unrealistic in the medium term,” added Dr Ezemenari.
“Nepal's economy is on the path to recovery amid the severe impacts of the global COVID-19 pandemic which has affected people lives and livelihoods, and businesses,” said Finance Minister of Nepal Bishnu Prasad Paudel.
Minister Poudel further said, “The recommendations that can help harness the potential of exports in supporting Nepal’s economic recovery are in line with the government’s policies and priorities.”
According to him, the Government of Nepal was working together with development partners and the private sector on a green, resilient and inclusive development agenda to help Nepal build back better and greener from the pandemic.
Similarly, Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka, said, “We welcome the government’s planned reforms to support Nepal’s green, resilient, and inclusive development. This will be the foundation for Nepal to emerge stronger from the crisis.”
He added, “We look forward to continued collaboration with the government and development partners in this effort, particularly on investments that harness Nepal’s export potential to support a sustainable and resilient recovery.”