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. Making public the National Account Statistics on Tuesday, the National Statistics Office (NSO) estimated that Nepal’s economy would grow by 2.16 percent in the current fiscal year 2022/23. With an acute liquidity crunch, higher interest rates, rising inflation, and sluggish market demand, the country’s economy has been under pressure from the start of FY 2022/23. The economy grew by a meager 1.7 percent in the first quarter of the current fiscal year. In its economic growth projection for the second quarter, NSO said the gross domestic product (GDP) growth has been negative by 1.1 percent. However, NSO has expected that economic growth will be positive by the last quarter of the current fiscal year. Similarly, Nepal’s gross domestic product (GDP) is estimated to be at Rs 5,381bn in FY 2022/23. Much lower than WB’s and ADB’s projections

NSO’s GDP growth projection is much lower than what World Bank (WB) and the Asian Development Bank (ADB) forecasted a month ago. Both WB and ADB have projected that Nepal’s economic growth would grow at 4.1 percent this year. On the other hand, the government set an ambitious growth rate target of eight percent in the budget of the current fiscal year.

The per capita income growth of Nepalis has stagnated this year as the NSO estimated that per capita GDP will remain unchanged from last year’s $1399. Per capita income means an average income of a person in a year. The average per capita income of Nepalis increased by $122 in the last fiscal year. Economist Dr Biswas Gauchan has termed the NSO projection as realistic. “Given the current state of our economy which is grappling with higher inflation, high interest rates, and liquidity crunch, the growth projection is realistic,” said Gauchan. “However, for a developing country like Nepal, this growth rate cannot be termed as satisfactory.” Contraction in major sectors This year, the slump in the construction, mining, transport, manufacturing, and wholesale and retail trade sectors dragged the overall economic growth. The NSO has projected that the mining sector will grow by a meager 1.11 percent in FY 2022/23 compared to a growth of 8.84 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 in this fiscal year. Similarly, the wholesale and retail trade's growth has been projected to be negative by 2.96 percent in this fiscal compared to growth of 7.46 percent in the last fiscal. According to NSO, 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. Business community members have been saying that the mining and construction sectors have been going through a prolonged slump which has resulted in 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 construction activities in the country coming to a halt. The NSO has stated that the electricity and accommodation (hospitality) sectors will have the highest growth in FY 2022/23. According to the projection, the electricity sector will grow by 19.36 percent while accommodation will grow by 18.56 percent. A gradual recovery in the tourism sector with a surge in tourist arrival has helped the hospitality sector. Ramprasad Thapaliya, Chief of NSO said that the contraction in economic activities has affected the country’s economic growth. “The National Account Statistics will help the federal government to prepare the budget for the next fiscal year,” he said, “We have made public the real state of the economy, based on which the government can bring the necessary policy interventions through the next budget.”