Coronavirus may hit the economy

The price of garlic shot up from previous month’s Rs 245 per kilo to Rs 555 this week. The unexpected rise in the price of the popular kitchen ingredient, which is known for its immunity-boost­ing properties, comes at a time when other vegetables are getting cheaper, according to the Kalimati Fruits and Veg­etable Market Development Board.Likewise, drug dealers say the price of disposable face masks has surged from a retail price of Rs 500 per packet to a wholesale price of Rs 800.

The reason behind both price hikes is the same: the unfolding coronavirus crisis.

The outbreak has affected people’s lives as well as tour­ist arrivals in Nepal. Experts fear the health crisis spread­ing out from northern neigh­bor China may harm the national economy. Nepal’s private sector is mostly con­cerned with its likely impact on tourism.

“Tourist arrivals in January were down by half compared to the same period last year. We foresee an extreme impact of coronavirus in tourism and the Visit Nepal campaign,” says Satish Kumar More, Pres­ident of Confederation of Nep­alese Industries (CNI).

Chinese contractors work­ing in Nepal are yet to return from China after celebrating Chinese New Year (January 25) in their hometowns. Pri­vate sector representatives fear that projects may be delayed.

According to Bhuwan Kumar Dahal, president of Nepal Bankers’ Association, the banking sector could also be badly hit. “Hotels and other hospitality businesses will be harmed,” he says. “So we may lose income from tour­ism.” China is a major source country for Nepal’s tourism dollars. Banks are concerned that they may lose their invest­ments in hospitality and avi­ation due to the coronavirus tourist slump.

“Hotels in Pokhara are already in trouble,” says another banker. “With the fall in number of Chinese tourists, the revenue of travel and air­line companies will go down as well.”

Banks last year increased their investment in hospitality and aviation anticipating good turnout during Visit Nepal 2020. “Banks have invested even in reopening closed hotels,” says another banker, adding that such investment may not bear fruit in the wake of the coronavirus crisis.

Hari Bhakta Sharma, former CNI president, also thinks the virus scare may invite a finan­cial crisis. “Our manufactur­ing is dependent on imported raw material. As China cuts down exports of raw material used for medicines, fertiliz­ers, pesticides and the like, our industries may face prob­lems,” he says.

There is also a risk of gen­eral inflation. Nepal imports electrical items, readymade garments, shoes and other consumer products from China. If supply from China decreases and Nepal has to import from third countries, the products may become more costly.

Nepal’s foreign currency reserves cold also be battered. Both Chinese aid and tourist arrivals will go down, caus­ing Nepal to lose foreign cur­rency income. This adds to the worry because Nepal Rastra Bank has already projected foreign currency income to decrease in its annual mon­etary policy this year. Bank officials say Nepal’s ability to purchase goods from abroad maybe affected by the virus outbreak