The World Bank (WB) has said that any possible rise in Nepal’s economic growth rate of 4 percent would depend critically on political stability.
Releasing Nepal Development Update, a half-yearly publication on Nepal’s economy, the WB said the quality of the process leading to new elections and how the elected government manages the opportunities to the country’s benefit would determine growth. If the polls are held on time and the result achieves broad consensus, it said that Nepal could be expected to achieve a growth of 4-4.5 percent this year. The government has aimed at an economic growth rate of 5.5 percent.
The WB report has pointed out the political developments that have continued to overshadow and impede economic development. “Since the end of the monarchy, politics has trumped economics, a trend that needs to be reversed to put Nepal on a higher growth trajectory,” the report said.
“With the elections for a new Constituent Assembly expected in November, political volatility and uncertainty continue to hamper growth-oriented fiscal policies and have promoted the private sector to adopt a wait and see position regarding future investment.”
It said that the successful holding of the election would help recover both public and private investment from the low levels of recent years. However, it said that the outcome of the elections, particularly whether it is perceived to be broadly legitimate and representative, would affect investor sentiments.
The WB has stated that political stability needs to be followed by structure reforms that tackle enduring sources of fragility including financial sector consolidation, public financial management reform, improvement in investment climate and strategy to address the gradual erosion of Nepal’s external competitiveness to put it on a solid growth path.
WB Country Director for Nepal Johannes Zutt said that although Nepal’s recent growth trend of 4-5 percent matched average international growth trends, it would not be enough to bring down poverty significantly and bring prosperity. “Nepal should achieve a growth of 8-9 percent in a sustained way which many developing countries have achieved including India and China,” he added.
He said that Nepal suffered from under-investment from both the public and private sectors, and that the government must make efforts to increase both. “The government’s failure to spend has resulted in continuation of poor infrastructure including lack of access to modern energy and good transportation links hurting growth,” he added. Nepal’s public investment declined 19.2 percent in fiscal 2011-12 and 18.8 percent in fiscal 2012-13, according to the report.
The report has projected that public spending would grow this year due to a full budget presentation and adaptation and measures taken to monitor development projects. The report has projected inflation to reach 9 percent estimating a good agricultural harvest this year compared to last year.
However, further depreciation of the Nepali rupee against the US dollar, wage hikes and election-related spending could affect inflation. The monetary policy for the current fiscal year has targeted reining in inflation to 8 percent.
The report has stressed continued pegging of the Nepali currency with the Indian currency due to Nepal’s huge trade dependence on the southern neighbour and the policy’s role in maintaining clear monetary stability in Nepal. It said that fears of serious negative economic consequences of the rupee’s fall were exaggerated, but said that some specific groups and sectors of the economy might lose out.
source: the kathmandu post,25 oct 2013
LINK
Releasing Nepal Development Update, a half-yearly publication on Nepal’s economy, the WB said the quality of the process leading to new elections and how the elected government manages the opportunities to the country’s benefit would determine growth. If the polls are held on time and the result achieves broad consensus, it said that Nepal could be expected to achieve a growth of 4-4.5 percent this year. The government has aimed at an economic growth rate of 5.5 percent.
The WB report has pointed out the political developments that have continued to overshadow and impede economic development. “Since the end of the monarchy, politics has trumped economics, a trend that needs to be reversed to put Nepal on a higher growth trajectory,” the report said.
“With the elections for a new Constituent Assembly expected in November, political volatility and uncertainty continue to hamper growth-oriented fiscal policies and have promoted the private sector to adopt a wait and see position regarding future investment.”
It said that the successful holding of the election would help recover both public and private investment from the low levels of recent years. However, it said that the outcome of the elections, particularly whether it is perceived to be broadly legitimate and representative, would affect investor sentiments.
The WB has stated that political stability needs to be followed by structure reforms that tackle enduring sources of fragility including financial sector consolidation, public financial management reform, improvement in investment climate and strategy to address the gradual erosion of Nepal’s external competitiveness to put it on a solid growth path.
WB Country Director for Nepal Johannes Zutt said that although Nepal’s recent growth trend of 4-5 percent matched average international growth trends, it would not be enough to bring down poverty significantly and bring prosperity. “Nepal should achieve a growth of 8-9 percent in a sustained way which many developing countries have achieved including India and China,” he added.
He said that Nepal suffered from under-investment from both the public and private sectors, and that the government must make efforts to increase both. “The government’s failure to spend has resulted in continuation of poor infrastructure including lack of access to modern energy and good transportation links hurting growth,” he added. Nepal’s public investment declined 19.2 percent in fiscal 2011-12 and 18.8 percent in fiscal 2012-13, according to the report.
The report has projected that public spending would grow this year due to a full budget presentation and adaptation and measures taken to monitor development projects. The report has projected inflation to reach 9 percent estimating a good agricultural harvest this year compared to last year.
However, further depreciation of the Nepali rupee against the US dollar, wage hikes and election-related spending could affect inflation. The monetary policy for the current fiscal year has targeted reining in inflation to 8 percent.
The report has stressed continued pegging of the Nepali currency with the Indian currency due to Nepal’s huge trade dependence on the southern neighbour and the policy’s role in maintaining clear monetary stability in Nepal. It said that fears of serious negative economic consequences of the rupee’s fall were exaggerated, but said that some specific groups and sectors of the economy might lose out.
source: the kathmandu post,25 oct 2013
LINK
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