NRB paints mixed macroeconomic picture in first seven months of current FY

Kathmandu / Mar 19: Consumer price inflation has accelerated to 5.0 percent in mid-February 2018 from 3.3 percent recorded in mid-February 2017, Nepal Rastra Bank (NRB), the central bank, stated in its report entitled ‘Current Macroeconomic and Financial Situation of Nepal’ released on Monday.

The report based on the seven months’ data of fiscal year 2017/18 stated that a rise in prices of food items mainly contributed to an upward trend in inflation in the review period.
The report said available macroeconomic data of the first seven months of 2017/18 show a mixed macroeconomic outlook going forward. Incessant summer rains and widespread flood in the southern plains hit summer paddy production. Winter rains have remained scanty. As a result, the growth in farm output is expected to be less than that of last year.

It stated that on the non-agricultural front, the performance of energy, construction and reconstruction, and tourism is expected to be better than that of last year. The completion of some hydropower projects is expected to enhance the industrial capacity utilization and help spur overall economic activities. A pick up in tourist arrival and an increase in investment in hotels underpin an optimistic outlook of the overall hospitality industry. An uptick in foreign direct investment has ramped up the construction of some hydropower projects and the production of cement. On the top of these factors, the completion of elections and formation of governments at all three levels has created a congenial environment for private sector investment. Interaction of these developments is likely to result in a healthy growth outlook in 2017/18.

According to the situation report, the year on year (y-o-y) consumer inflation has mildly gone up to 5 percent in mid-February 2018 from 3.3 percent a year ago. Although consumer inflation is on slightly upward trend, the average inflation is expected to remain below the annual forecast.

It stated that the financial conditions continue to remain tighter. A loss in the accumulation of international reserves on accounts of a deficit in the overall balance of payments along with a significant rise in current account deficit has contributed to tighter financial conditions. A pick up in government expenditure is expected to ease financial conditions in days ahead. RSS