WB expects Nepal's GDP growth rate to reach 3.5%

13:32, May 20, 2010      

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The World Bank has estimated Nepal's gross domestic product (GDP) growth rate for fiscal year 2009-10 at 3.5 percent.

According to Thursday's The Himalayan Times daily, this is less than a high growth rate of 5.3 percent in 2007-08. "Political uncertainties, a cooling down of new construction and energy shortages have constrained growth rates," said the World Bank in a report.

The country ended a decade-long conflict in 2006 and has since been working to establish a "new" Nepal with inclusive and accountable governance structures. However, the transition remains complex and political uncertainty can lead to a deterioration of security hurting the economic performance.

"Fiscal management has remained prudent: there has been progress in revenue administration," it said adding that service provision, especially in education and health, is improving as community and user groups are increasingly involved in taking decisions that affect their lives.

The government expects agriculture to grow by 1.1 percent, against the earlier projection of 3.3 percent. Non-agricultural growth is expected to nearly halve to 3.6 percent from the 6.6 percent projected earlier.

Prolonged drought and unseasonal rains adversely affected Nepal ' s agriculture, which contributes 33 percent to GDP.

A grain deficit of 400,000 tons is expected in the fiscal year and there has been little or no new investment to mitigate the effects of weather.

Investment in agriculture and irrigation remained at low average of 0.55 percent of GDP in fiscal year 2009, said the report.

Industrial production growth has been negatively impacted by power shortages, strikes, transport disruptions, and other disputes.

The appreciating real exchange rate has also hurt manufacturing exporters. The government, nonetheless, projects a recovery of manufacturing growth to 2.7 percent for this fiscal year, again, on the back of the construction boom.

The service sector has become an important engine of growth, it ' s contribution to GDP is now up to 52 percent over 46 percent 10 years ago buoyed by increased in tourism receipts, telecommunications, and increase in investments in social services including health and education.

Strong revenue efforts and generous foreign aid have helped to finance rising spending. Foreign aid rose from 3.6 percent of GDP in fiscal year 2006-07 to 4.7 percent of GDP in fiscal year 2008- 09.

Meanwhile, the WB said that economic prospects are clouded by political uncertainty that is expected to continue until key stakeholders reach consensus on type and shape of the new government. Business confidence is expected to remain low with continued law and order problems, extortion, and occasional strikes.

Source:Xinhua

(Editor:黄蓓蓓)

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