Nepali economy will grow by 4.7 percent in 2023: ADB

Kathmandu / Sept 21: Nepal’s economy is estimated to grow moderately by 4.7 percent (at market prices) in 2023, according to the Asian Development Bank (ADB).

Unveiling its flagship economic publication ‘Update of the Asian Development Outlook (ADO) 2022’ on Wednesday, the ADB has downsized the projected growth of the country’s GDP from 5.8 percent earlier. Implementation of a tight monetary policy, check in imports, marked decline in foreign exchange reserves and inflationary pressure that the economy is facing have been identified as the main reasons behind the slow economic growth rate.

“Downside risks to growth may arise from further stringent measures by the authorities that may be necessary to curb import, which will depress domestic production and consumption, adversely affecting growth,” said ADB Country Director for Nepal Arnaud Cauchois. “A resurgence of COVID-19 infections leading to lockdown measures, intensification of dengue fever straining the fragile health system, disasters triggered by natural hazards, and geopolitical turmoil may further dampen growth prospects.”

The ADB report highlights that agriculture growth will likely be boosted owing to a normal monsoon, but the ongoing fertilizer shortages may adversely affect paddy production. Industry is expected to grow on increased generation of hydroelectricity and capacity utilization of industries.

The report also states that services growth will be moderate owing to a slowdown in real estate, wholesale, and retail trade activities, induced by credit control measures and hike in interest rates. But provincial and federal level elections scheduled in November 2022 will stimulate spending, supporting GDP growth.

The government through the budget for the fiscal year 2022/23 has adopted an expansionary fiscal policy. The budget talks about focusing on strengthening agriculture, industry, infrastructure, and social protection. However, the monetary policy is contractionary, aimed at curbing high credit growth to contain domestic demand, escalating prices, and rising imports.

The ADB has estimated that Nepal’s inflation rate will likely fall marginally to 6.1 percent in 2023 from 6.3 percent in 2022. This is due to the tightened monetary policy, a normal harvest, subdued oil prices and a modest inflation decline in India.