KATHMANDU: The World Bank (WB) has projected the economic growth rate of Nepal to stand at 5.1 percent in this fiscal year, downsizing the value by one percentage point.
The WB’s revised estimation is lower than its own earlier projection. The international lending organization, in June 2022, estimated the growth rate at 6.1 percent.
Unveiling its report titled ‘Global Economic Prospects’ on Tuesday, the WB has projected that the country’s growth rate will remain at 4.9 percent in 2023/24. The rate is also lower than its earlier estimate by 0.9 percentage point.
The WB has mainly pointed out the ongoing economic slowdown and travel restriction related to COVID-19 pandemic as the main cause behind the decline in economic growth rate of Nepal. “Nepal saw international arrivals drop, particularly from Chinese tourists affected by COVID-related restrictions, as of September 2022,” reads the WB’s report. The WB has however considered the growth pace of Nepal, India and the Maldives still robust, compared to other South Asian countries.
The government records show that the country’s external as well as domestic sectors are not performing well at present. While tourism has just started to rebound, the investment is pretty low due to exorbitant interest rates and soaring inflation.
The WB has posted even more of a dismal growth rate regarding the global economy. Given the fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.
The global economy is projected to grow by 1.7 percent in 2023 and 2.7 percent in 2024. The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95 percent of advanced economies and nearly 70 percent of emerging market and developing economies.
According to the WB report, excluding China, growth in emerging markets and developing economies is expected to decelerate from 3.8 percent in 2022 to 2.7 percent in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds.