Nepalese economy on the road to gradual recovery: Fitch

Singapore, June 5 (ANI): Fitch Solutions kept real GDP growth forecast for Nepal for FY21 (mid-July 2020 to mid-July 2021) at 2% and expected growth of 3.5% for exercise 22.

This figure is lower than the Asian Development Bank’s 3.1% projection and the World Bank’s 2.7% projection.

“Nonetheless, our outlook reflects our view of a rebound from a 1.9% contraction in FY20. Our view of a rebound in FY21 is due to large remittances which, we believe would have helped offset some of the lost revenue due to the pandemic, ”Fitch said.

Meanwhile, a revival of tourism in Nepal since December 2020, while slow, will also help support domestic businesses and ease the income shock from the pandemic. Fitch said he expects consumption to drive the recovery.

Although the economy has suffered a sharp decline in tourism since the borders were closed from March 2020 and countries have limited leisure travel abroad, which impacted the first half of the year. he year 21 which had a negative shock to national revenues, year 21 saw a sharp increase in remittances of 16.5% year-on-year. in Nepalese rupees during the first three quarters of fiscal year 21.

This will mitigate the overall impact of the pandemic on income. Easier movement restrictions for most of FY21 will also lower barriers to consumer spending and support consumer confidence.

Private investment is likely to be supported by improving the business environment, low interest rates and government pandemic support programs.

Fitch expects net exports to make a positive contribution of 0.6 percentage point in FY21, with projections for export growth of 5 percent and import contraction of 0.6 percent.

Export growth will be driven by food and live animals as well as machinery and manufactured goods. Imports can be quite stable compared to FY20 due to lower imports of capital goods and fuel being offset by higher food imports.

Fitch said gross fixed capital formation growth will remain capped during the year despite improving economic environment.

While private investment is likely to increase, public investment will remain low due to poor budget execution at both national and subnational levels.

The country also suffers from a lack of staff with sufficient technical expertise and poor coordination between different levels of government, Fitch said.

In addition, the country is in a political turmoil that has since escalated into a constitutional crisis since the end of 2019 with no end in sight. This will likely continue to hamper the implementation of public projects as well as investor confidence. (ANI)

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