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Nepal's economic growth to top 5%
Publication Date : 29-04-2014
The current fiscal year will see the highest economic growth for Nepal in six years, thanks to a strong performance from the agriculture and service sectors. The Central Bureau of Statistics (CBS) on Monday projected the country’s economic growth at 5.15 per cent—the highest since 2008-2009.
This is also the first time in the last six years that the country’s economic growth would cross the 5-per cent mark. The last time the growth rate had crossed 5 per cent was in fiscal year 2007-08 when GDP growth was 5.8 per cent. However, the projected growth rate is still lower than the government target of 5.5 per cent.
Citing better growth prospects in the agriculture and service sectors, the bureau’s National Account Estimate Report projected encouraging growth for this fiscal.
According to the CBS, the agriculture sector is estimated to grow at the rate of 4.72 per cent and the non-agriculture sector at 5.34 per cent.
Economists say the higher growth prospect seen in the economy is a welcome development but it may not be sustainable as it is dependent on agriculture which basically relies on good monsoon.
Shankar Sharma, former vice-chairman of the National Planning Commission (NPC), said that despite encouraging growth prospects, sluggish growth of the country’s industrial sector should be a major concern. According to the CBS, the manufacturing sector is estimated to grow by a mere 1.86 per cent, down from 3.72 per cent of the last fiscal. “The good side of the industry led-growth is that it creates employment in mass scale and productivity remains high,” said Sharma.
The country’s industrial sector is currently grappling with acute power shortage which has not only hit its productivity but has also increased the cost of production. Sharma’s assessment is shared by Dipendra Bahadur Kshetry, former vice-chairman of the NPC, saying that only industry-led growth remains sustainable. “Capital expenditure too will be crucial to realising that projection,” he said.
The CBS report shows three major cereal products—paddy, maize and wheat—are projected to grow by 12.04 per cent, 9.85 per cent and 6.05 per cent respectively. Fruit, meat and dairy sector are also projected to grow. “That is why, annual growth rate of the agriculture sector has been projected to grow better than last fiscal year,” the report says. With delayed monsoon and fertilizer shortage, the agriculture sector growth was limited to 1.07 per cent in the last fiscal.
As for the service sector, wholesale and retail market, hotel and restaurant sector, transportation, financial intermediaries, real estate, education and health all are projected to grow. As the service sector accounts for 52.23 per cent of the economy, its growth drives the overall economic growth.
Citing poor capital spending, international financial institutions, including World Bank, Asian Development Bank and International Monetary Fund, have projected Nepal’s economic growth at 4.5 per cent.