With the sharp slowdown in economic activities, the country’s economic growth has fallen even lower than during the Covid-19 pandemic. According to the National Statistics Office (NSO), Nepal’s economy grew by a meager 0.8 percent in the first quarter of the current fiscal year 2022/23 compared to 0.9 percent in the corresponding period of FY 2020/21 when the impact of the Covid-19 epidemic was intense.
The slump in the construction and mining sectors, along with minimal growth in the agriculture and manufacturing sector dragged down the overall economic growth. The NSO report shows the mining sector logged a negative growth rate of 29.2 percent while the construction sector’s growth is negative by 24 percent. Similarly, the agriculture sector grew by only 1.6 percent while the manufacturing sector grew by 1.9 percent.
The first quarter of the fiscal year is generally the main season for wholesale and retail trade. As major festivals fall in this quarter, business activities generally increase. However, no such growth in business activities was seen this year as wholesale and retail trade recorded a negative growth of 3 percent.
The mining and construction sector have been going through a prolonged slump due to a sharp decline in the demand for cement, steel, and other construction materials.
The demand for cement, steel, sand, and other construction materials has decreased with a slowdown in construction activities in the country. The decline in public construction and the downturn in private house construction have resulted in a decrease in the consumption of construction materials.
Economists say a low economic growth rate indicates economic activities are not sufficiently dynamic and the economy is not expanding. The country’s private sector has been complaining that the crisis in the financial system has affected the demand and supply chain of the economy and the NSO report has reiterated this as a fact.
The government has always struggled to expedite the development and construction works in the first quarter, but the private sector’s activities were hard hit by the liquidity crunch, higher interest rates, rising prices, and falling demand.
The only silver lining is, the hotel and restaurant service sector’s growth has increased by 45.8 percent in the first quarter of this fiscal year compared to a decline of 4.5 percent in the first quarter of last fiscal year. With the impact of the Covid-19 pandemic subsiding, the hospitality sector is vibrant with an increase in tourism activities.
Q1, 2021/22 (in percent)
Q1, 2022/23 (in percent)
|Accommodation and Food Service||-4.5||45.8|
|Electricity & Gas||16.6||27.5|
|Financial and Insurance||-3.7||22|
|Administrative and Support Service||-0.3||7|
|Professional and Technical Activities||2.6||6.6|
|Arts, Entertainment and Recreation||2.9||4.7|
|Public Administration and Defense||7.9||4.6|
|Health and Social Work||1.3||3.1|
|Information and Communication||10.6||1.4|
|Wholesale and Retail Trade||-12.2||-3.0|
|Mining and Quarrying||24||-29.2|