Press Release

Press Release of Book Launching Program "Nepal Economic Outlook 2016-17"

The favorable monsoon, regular supply of electricity, low number of political strikes, improvement in post-earthquake reconstruction activities, expansion in government revenue and capital expenditure have all contributed to the highest economic growth for Nepal in last 15 years, says a study by Institute for Integrated Development Studies at Kathmandu University. Central Bureau of Statistics has already projected a higher real Gross Domestic Product growth rate of 7.5 percent for the fiscal year 2016-17.

IIDS at KU launched its two publications- Nepal Economic Outlook 2016-17 and Selected Essays on Nepali Economyamid a functionon 31st July 2017 at Trade Tower, Thapathali in the presence of eminent personalities having interest in Nepali economy. Honorable Minister of Finance, Mr. Gyanendra Bahadur Karki was the chief guest of the event. Dr. Swarnim Wagle, Honorable Member of National Planning Commission chaired the event. 

The study report Nepal Economic Outlook 2016-17 forecasts real per capita Gross Domestic Product growth rates of the country for FY 2017-18 and FY 2018-19. Under the baseline scenario (without policy interventions and shocks), GDP growth rate in FY 2017-18 is expected to remain at 3.54 percent and is forecasted to increase to 3.79 percent. Similarly, under the alternative scenario of recurrent and capital expenditures expected to grow at the rates of 46.27 percent and 14.68 percent respectively, GDP growth is forecasted to remain at 3.51 percent and 4.08 percent in FYs 2017-18 and 2018-19 respectively.

The agriculture sector, which still serves as the major economic sector in terms of people's involvement, contributing 27.04 percent to the nominal GDP, has seen a healthy growth rate of 5.29 percent in FY 2016-17. The strong growth can be largely attributed to acceleration in the production of principal cereals, due in part to favorable monsoon, commercialization of agriculture, expansion of irrigation, and availability of fertilizers following the normalization of supplies. The industrial sector too performed strongly with the highest growth rate since FY 2001-02 with double digit growth in almost all the industrial subsectors. The major contributor to this has been the regular supply of electricity and improvement in post-earthquake reconstruction activities. Similarly, services sector, accounting for 51.54 percent of nominal GDP, has seen a growth rate of 6.9 percent, owing to increases in the production of domestic goods, imports of goods, and tourist arrivals and favorable business environment.

The government revenue has registered a double digit growth rate this year driven by increases in registration fee, non-tax revenue and income tax. Government expenditure, which had reduced significantly owing to supply disruption has started to recover from mid-June 2016. Despite an early budget presentation, budget has been underutilized as in previous fiscals, indicating the existence of structural flaws in the process of budget formulation and implementation.

Both food and beverages and non-food and services inflation continued to fall after the end of trade disruptions. Consumer price inflation remained at 2.92 percent in mid-March 2017. In fact, food and beverages inflation was negative in mid-March 2017, marking the third consecutive month in which the economy experienced negative inflation. Due to declines in housing and utilities inflation, the non-food and services inflation has slowed down. Under the baseline scenario, consumer price inflation have been forecasted to remain 6.05 percent in FY 2017-18 and 6.03 percent in FY 2018-19.

While merchandise exports has increased, imports too has increased largely, widening the trade deficit by a five-year high of 48 percent in the first eight months of FY 2016-17. Remittances growth has contracted due to the decrease in the number of overseas migrant workers after the devastating earthquake. Current account deficit has also widened owing to sharp increase in trade deficit and the slowdown in remittances growth.

The Nepal Economic Outlook 2016-17 also features a special study entitled Remittances, Economic Growth, and Human Development. The study tries to empirically determine how remittances impact economic growth and human development at the macro level in Nepal. The results from the study found that remittances does have a short run, but no long run impact in economic growth. Similarly, it has been observed that remittances have long run impact on human development. However, no short run relationship could be evidenced.

Similarly, during the event, IIDS special Edition Selected Essays on Nepali Economy was also released. The book is a collection of essays on the Nepali economy written by various national and international sectorial experts.This special edition of IIDS focuses on key contemporary issues facing the country with the medium term ambitions of becoming a middle income country by 2030 in sight. Essays in this volume are grouped into three core areas: Part I- social mobility, inclusion and protection; Part II- economic policy reforms; and Part III-cross-border cooperation in energy and water. Part I includes five chapters on poverty, health and agriculture; Part II contains four essays on trade, foreign direct investment and tax reform; and Part III focuses on energy and water issues in the regional context and contains three essays.

The program showcased short presentations on the two books. Honorable Minister of Finance Mr. Gyanendra Bahadur Karki highlighted the importance of research and mentioned the important role that IIDS will have to play in the coming years for Nepal's economic development. He emphasized on the point that if every individual does his part sincerely, economic progress is possible in reality and will not be limited to paper.

The chairperson of the event Dr. Swarnim Wagle presented a microscopic analysis of the book Selected Essays on Nepali Economy. He further mentioned that, Nepal has experienced increased access in education and reduced poverty rates from 66 percent in 1994 to 25 percent in recent years. Dr. Wagle expressed that there has been considerable improvements in social and political dimensions of the country but the economic dimension has not experienced the desired change and therefore, needs a major push.

Similarly, the Executive Director of IIDS, Dr. Bishnu Dev Pant informed the audience that the book Nepal Economic Outlook 2016-17 gives an analysis of the economic development of the current fiscal year, macroeconomic forecast for FY 2017/18 and FY 2018/19 along with an insight on the impact of remittance on Nepal's economic growth and human development.

The electronic version of Nepal Economic Outlook 2016-17 can be downloaded from IIDS website. IIDS at KU is one of the leading private non-profit and non-partisan think tank organizations in Nepal. Nepal Economic Outlook is IIDS' flagship publication that analyses the state of Nepal's economy and makes growth forecasts for major macro variables.