Nepal Government Projects 3.5% Economic Growth Amidst Setbacks

Kathmandu. The government has projected the country's economic growth rate to be limited to 3.5 percent. This projection was made in the mid-term review of the current fiscal year's budget.

The annual growth rate of the Gross Domestic Product (GDP) for the current fiscal year was initially estimated to be six percent. However, the new projection, revised in the mid-term review, places the economic growth at 3.5 percent due to factors such as the decrease in paddy production, area, and productivity, sluggishness in the construction sector, and a downturn in real estate transactions. In contrast, the estimated GDP growth rate for the last fiscal year was 4.6 percent.

According to the mid-term evaluation report of the budget, the preliminary estimate suggests that the GDP at basic prices grew by three percent in the first quarter of the current fiscal year. The revised estimate for the same period last fiscal year shows a growth of 2.9 percent in GDP at basic prices.

In the first quarter of the current fiscal year, the total value addition in the agriculture sector is estimated to expand by 1.36 percent compared to the same period last fiscal year. Specifically, the relatively low growth rate for the total value addition in the agriculture sector is estimated based on the expected decrease in paddy production and increases in the production of livestock, vegetables, and fruits. However, the production of food grains such as maize, millet, and buckwheat is expected to increase in the current fiscal year. Last fiscal year, the production of food grains including paddy and wheat, and maize, was estimated to have increased by 2.67 percent, and cash crops by 2.01 percent.

In the first quarter of the current fiscal year, the total value addition in the industry sector is estimated to expand by 5.44 percent compared to the same period last fiscal year. It is anticipated that the expansion in energy and construction sector activities in the current fiscal year will have a positive impact on the overall industry sector. In the first quarter of the current fiscal year, the total value addition in manufacturing industries is estimated to expand by 1.52 percent.

During this same period, the total value addition in the service sector is estimated to expand by 3.03 percent compared to the same period last fiscal year. It is anticipated that the expansion in wholesale and retail trade, financial intermediation, general administration and defense, tourism activities, and personal service activities in the current fiscal year will positively impact the overall service sector.

According to the budget mid-term review report, the average inflation for the first six months of the current fiscal year is 1.7 percent. In the corresponding period of the previous year, inflation was 4.97 percent.