世界银行-尼泊尔发展更新：全球挑战和国内复兴（英）-2022.4-40页_11mb

Nepal Development Update Summary

Core Content

The Nepal Development Update, dated April 13, 2022, provides an overview of the country's economic developments in the context of the ongoing recovery from the impacts of the COVID-19 pandemic and the challenges posed by the Russia-Ukraine conflict.

Main Economic Developments

A.1 Context

• Global Recovery: The global economy rebounded in 2021 after a contraction in 2020, with a 5.5% growth rate, the highest in 80 years.
• Regional Recovery: South Asia and Gulf Cooperation Council (GCC) countries, major destinations for Nepali labor migrants, also saw recovery, with growth rates of 7% and 2.6%, respectively.
• Nepal's Pandemic Response: Nepal experienced three waves of the pandemic, with strict lockdowns in 2020 and gradually eased measures as vaccination rates increased.
• Vaccination Progress: As of March 30, 2022, 74.2% of the population had received at least one dose, and 64.2% had completed the vaccination regimen.
• Vaccination Support: The vaccination drive was supported by various international organizations and donations, including VeroCell, Covishield, AstraZeneca, Moderna, Pfizer, and Johnson & Johnson.
• Government Strategy: The Government of Nepal (GoN) transitioned to a green, resilient, and inclusive development (GRID) path in September 2021, aiming to address the inter-related challenges of economic recovery, climate risks, and continued exclusion of vulnerable groups.

A.2 Real Sector

• Economic Recovery: The economy continued to recover in H1FY22 after a contraction in FY20 and a modest rebound in FY21.
• GDP Growth: Real GDP is estimated to have expanded by 1.8% in FY21, following a 2.1% contraction in FY20 (Figure 3).
• Sectoral Performance:
  • Services Sector: The services sector was a primary driver of growth in H1FY22, with mobility data indicating a strong recovery in wholesale and retail trade, transport, and financial services.
  • Tourism Recovery: Tourism and related activities have started to recover, with an increase in international tourist arrivals, although they remain below pre-pandemic levels (Figure 7).
  • Industrial Sector: The industrial sector contributed to growth, driven by an increase in installed electricity capacity, particularly from the Upper Tamakoshi Hydropower Project (456 MW), which added 598 MW of capacity in H1FY22 (Figure 8).
  • Agricultural Sector: The agricultural sector faced a contraction in H1FY22 due to a significant drop in main season paddy production following unseasonal rains in October 2021 (Figure 5).

A.3 Monetary and Financial Sector

• Inflation Trends: Inflation decreased to 3.4% in FY21, below the FY20 rate of 6.3% and the central bank's ceiling of 7%. However, it began to accelerate in H1FY22, reaching an average of 5%.
• Monetary Policy: The central bank raised its policy rate by 2 percentage points in February 2022 to 5.5%, higher than the pre-pandemic rate of 5%.
• Credit and Deposit Growth: Private sector credit growth remained strong in H1FY22, with overdraft, real estate, and vehicle loans as key contributors. However, deposit growth slowed, leading to a liquidity shortage for banking and financial institutions.
• Financial Sector Reforms: Efforts are underway to revise financial sector regulations to strengthen identification of non-performing assets and provide clear guidance on restructuring and rescheduling.

A.4 External Sector

• Current Account Deficit: The current account deficit widened in H1FY22 to 7.9% of projected GDP, up from 1.2% in the same period of FY21.
• Remittances and Imports: Lower remittances and higher merchandise imports contributed to the widening deficit. The deficit is expected to narrow in the medium term as imports moderate and remittances stabilize.
• Foreign Exchange Reserves: Foreign exchange reserves fell to USD 9.9 billion in mid-June 2022, below the central bank's target of 7 months of imports.

A.5 Fiscal Sector

• Fiscal Balance: The fiscal balance improved in H1FY22, with the federal fiscal balance recording a surplus.
• Debt Reduction: Total public debt declined to 38.2% of projected FY22 GDP from 48.1% of GDP in end FY21.
• Fiscal Deficit: The fiscal deficit is projected to continue falling in the medium term, supported by strong revenues from import-related activities and a rollback of pandemic-related tax breaks.

Outlook, Risks, and Challenges

Medium-Term Outlook

• Growth Projections: Under a baseline scenario, the economy is expected to grow by 3.7% in FY22, accelerate to 4.1% in FY23, and rise further to 5.8% in FY24, close to its long-term potential growth rate.
• Inflation: Inflation is expected to average around 6% annually in the medium term.
• Current Account Deficit: The deficit is projected to narrow in the medium term following a widening in FY22.

Risks

• Russia-Ukraine Conflict: The war is expected to increase global commodity prices, widen the current account deficit, reduce growth, and increase inflation.
• Downside Scenario: A scenario with stricter import controls and slower expenditure consolidation could lead to adverse growth impacts, reduced capital spending, and a larger fiscal deficit.
• Climate and Natural Disasters: These are perennial risks that could impact agricultural production, government finances, and consumer prices.
• Policy Sequencing: The unwinding of accommodative fiscal and monetary policies needs to be carefully managed to avoid shocks to the private sector.

Policy Recommendations

• Strengthening Economic Reforms: Continuing policy reforms to address fiscal imbalances, improve spending efficiency, and accelerate private sector growth is crucial.
• Encouraging FDI: Simplified approval procedures can attract foreign direct investment (FDI), which can support job creation and growth without increasing public debt.
• Protecting Vulnerable Populations: The government's commitment to protecting vulnerable households through social assistance and economic opportunities remains important.
• GRID Approach: The green, resilient, and inclusive development (GRID) approach is expected to build a foundation for greener and more resilient growth, ensuring no one is left behind.

Key Indicators and Data

• Inflation: Average consumer price inflation increased to 5% in H1FY22.
• Electricity Capacity: Installed electricity capacity grew by 598 MW in H1FY22.
• Business Activity: New domestic business openings increased in H1FY22, although the structure of new firm openings showed a divergence.
• Tourism Recovery: International tourist arrivals have increased, but remain below pre-pandemic levels.
• Remittances: Remittance inflows declined in H1FY22, contributing to the current account deficit.

Conclusion

Nepal is on a path of recovery from the pandemic, with the services sector leading the way. The country's economic performance has been supported by accommodative monetary and fiscal policies, but challenges remain, including a widening current account deficit, rising inflation, and the impact of the Russia-Ukraine conflict. The government's commitment to the GRID approach and continued efforts to improve fiscal and economic policies will be critical in ensuring a sustainable and inclusive recovery.