Economic survey forecast paints a bleak pic of economy

It’s official. The country's economic growth will be limited to 2.16 percent. Findings of the Economic Survey presented by Finance Minister Prakash Saran Mahat at the parliament on Sunday point out that the economic growth as projected by FY 2022/23 budget will not be achieved this fiscal year. A sharp slowdown in economic activities, slackened domestic demand, tighter monetary policy, and persistent global headwinds have adversely affected Nepal's economy in the current fiscal year. According to the survey, the slump in the construction, mining, transport, manufacturing, and wholesale and retail trade sectors dragged down the overall economic growth this year. 

The consumption of Nepalis is projected to increase by 8.34 percent in the current fiscal year with the Nepalis likely to spend more than Rs 5,036bn on consumption alone.

The total investment has decreased by about five percent this fiscal. As per the survey, the total investment that stood at Rs 1,846bn, has decreased to Rs 1,754bn in this fiscal ‘due to a slowdown in credit disbursement and higher interest rates’. The survey has projected that the mining sector will grow by a meager 1.11 percent in FY 2022/23 compared to a growth of 8.8 percent in FY 2021/22.  The construction sector, which grew by 7.08 percent in the last fiscal year, is expected to remain negative by 2.62 percent this fiscal.  The wholesale and retail trade growth is projected to be negative by three percent this fiscal compared to a 7.5 percent growth in the last fiscal.  The growth of the manufacturing sector is likely to decelerate by 2.04 percent in FY 2022/23 due to higher interest rates, import restriction measures, and the slowdown in domestic consumption.  The electricity and accommodation (hospitality) sectors will have the highest growth in FY 2022/23, per the report. The electricity sector will grow by 19.4 percent while accommodation will grow by 18.6 percent. A gradual recovery in the tourism sector with a surge in tourist arrival has helped the hospitality sector.  The survey shows the government’s capacity to spend the allocated budget has weakened. The fact that only 248 kilometers of road were blacktopped in the current fiscal, compared to 618 kilometers last year, illustrates this decline.   The survey says only 104 kilometers of new roads have been constructed till the first eight months of FY 2022/23 compared to 155 km in the corresponding period of FY 2021/22. The same is the case with bridge construction. Only 75 new bridges were constructed this fiscal, compared to 80 bridges in the last fiscal.  The silver lining is the energy sector where the installed capacity of electricity generation has increased by 21.7 percent this fiscal. Nepal’s electricity generation capacity has reached 2666 MW from 2190 MW in mid-July 2022, according to the survey. It is estimated that 57 hydropower projects will be completed by the end of this fiscal year, adding 811 MW to the national grid. “It is estimated that an additional 754 MW of electricity will be generated from 36 projects to be completed in the fiscal year 2080/81,” the survey states. In a nutshell

• Economic growth in FY 2022/23 projected at 2.16 percent
• Size of GDP estimated at Rs 5,381bn
• Negative growth in manufacturing, construction, wholesale and retail trade sectors
• Energy and hospitality sectors to grow by double-digits
• 811 MW likely to be added the national grid
• Growth of mining and transportation sectors to remain lower than last fiscal
• Consumption of Nepalis is projected to increase by 8.34 percent in the current fiscal