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Economic survey: Economic growth a victim of political instability

KATHMANDU, JUL 07 -
The country’s economic growth has been held hostage by the protracted political instability, according to the Economic Survey released on Thursday. The report said Nepal’s economic growth will be limited to 3.5 percent in the fiscal year 2010-11, the lowest in the last four years.

The healthy growth of the agriculture sector helped the country to manage a 3.5 percent growth this year, it added.

However, despite the agriculture sector posting a 4.1 percent growth, the slowdown in the non-agriculture sector was what limited the growth.

The non-agriculture sector is estimated to grow by a mere 3.1 percent against last year’s 5.4 percent. Even in the non-agriculture sector, the predicted growth of the industrial sector is a disappointing 1.5 percent, the report said.

It said a combination of several factors like labour problems, energy crisis, decline in expansion of banks’ lending, slackness in remittance growth rate and the delayed budget, all contributed to the non-agriculture sector’s slowdown.

Over the last five years, the growth of the industrial sector has remained at just 0.3 percent. This resulted in decreased contribution of the sector—6.5 percent in the FY 2010-11 from the 9 percent in the FY 2000-01.

The slack economic growth was not unexpected, given the past three year’s budget becoming a victim of political tussle.

“It is natural to see a sluggish growth as there is no business environment in the country,” said Pradeep Jung Pandey, vice-president of the Federation of Nepalese Chambers of Commerce and Industry. Even the survey admits to this fact when it says major economic indicators are not satisfactory.

Both the government and private sector’s contribution to the gross domestic product (GDP) is likely to come down this year. The growth of the private sector investment to the GDP has continued to slow down since the FY 2007-08. The growth this year is expected to remain at 14.2 percent compared to the 15.7 percent the previous year. “This shows the unstable investment environment over the period,” said Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission.

The survey showed none of the targets set by the current budget were met. The budget has targeted an economic growth of 4.5 percent, inflation of 7 percent and balance of payment (BoP) surplus at Rs 9 billion. As per the survey, inflation was 9.6 percent while the BoP deficit was Rs 11.30 billion.

According to the report, the construction sector grew by 3.3 percent (5 percent last year), real estate by 2.6 percent (3.6 percent last year) while electricity, gas and water supply declined by 4 percent.

It said the growth in exports and slowdown in import are brighter sides of the economy. However, decline in imports has hit the country’s wholesale and retail trade, whose growth, according to the survey, is estimated to be negative by 0.2 percent.

However, Finance Secretary Krishna Hari Banskota put up a brave face. He said the country will see economic growth of four percent in the current fiscal year.

Posted on: 2011-07-08 08:44

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