Coronavirus Drives Nepal’s Economy Towards Unprecedented Economic Slump

Coronavirus Drives Nepal’s Economy Towards Unprecedented Economic Slump

Covid-19 has deeply impacted world economy and the economies across world. World Bank has urged the nations, especially the developing nations to adopt measures to curb the spread of Covid-19 and simultaneously ramp up their economies to prevent them from spiralling downwards. Last month, the World Bank released South Asia Economic Focus in which it predicted a sharp economic downfall in each of the eight nations of the region. It estimated a drop in regional growth between 1.8 and 2.8 percent in 2020, from 6.3 percent projected six months ago, what can be called the region’s worst growth rate in the last 40 years.

As per the report, Nepal was expected to witness an economic slump between 1.5 and 2.8 percent in 2020, pulled down by lower remittances, trade and tourism, and huge economic disruptions caused by the corona pandemic outbreak.

“We are closely monitoring how the COVID-19 pandemic is evolving across Nepal,” stated Faris Hadad-Zervos, World Bank Country Manager for Nepal. “Our immediate priority is to coordinate our action with the government, private sector and international development partners to ensure that health supplies and equipment are readily available and that a comprehensive recovery package is in place to support the poor and most vulnerable.”

The Central Bureau of Statistics (CBS) in its annual “National Account Estimates of 2019-20” realised in April projected that Nepal’s economic growth would fall to 2.27 percent in the current fiscal year 2019-20 ending in mid-July, against the targeted growth of 8.5 percent.

Though the country is still suffering unprecedented crisis due to the collapse of tourism industry, sharp fall in remittance, and retail business. Nepal is highly dependent on tourism industry with ongoing crisis it expects millions of revenue loss, and around 1.1 million of job losses, as per the Hotel Association of Nepal.

Besides, World Bank projected 14% of fall in the the country’s remittances, where as the remittances comprise 27.3% of GDP in 2019, the highest among any South Asian nation.

According to the Foreign Employment Board, around 5,34,000 Nepalese workers have registered to come back from Gulf countries and Malaysia.

Nepal also fears risk of increase in inflation. Nepal is dependent on imports to meet 80% of its basic needs and with limited supply from China, import of both raw materials and finished products from other countries is bound to turn costly. Despite all the predictions, yet the full impact of Covid cannot be measured until its over. 

According to the Ministry of Health and Population, Nepal has about 304 confirmed cases of the COVID-19 so far. The count is still relatively on a lower side.

With regard to the country’s economic growth, Jagadish Chandra Pokharel, a senior Nepali economist said “The economic growth projected by the CBS is the result of lockdown effect.” Pokharel, who is also former vice-chairman of the National Planning Commission, added, “It is still positive because we have not yet seen the full force of COVID-19 effect paralyzing Nepal’s weak medical system.”

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