Nepal to achieve only two percent growth rate in 2006: ADB

A report of the Asian Development Bank (ADB) has said that Nepal will achieve only two percent growth rate in the year 2006 due to poor weather affecting production of both winter and summer crops.

ADB's flagship annual economic publication, Asian Development Outlook (ADO) released on Thursday said, "In Nepal the economy faltered in 2005, reflecting a weather-related decline in paddy production, disruption caused by insurgency, a downturn in tourism, and continued weak growth in industry. GDP growth is forecast to slow to 2% in FY2006 because of poor weather affecting production of both winter and summer crops."

The report attributed decline in paddy production, low industrial growth and contraction of the tourism sector as major factors for decline in growth rate from 3.5% in 2004 to 2.3% in 2005.

The report further said that agricultural growth will be pulled down by the weather related decline of both winter and summer crops this year also. The report added that the low growth rate will continue in the industry despite the slight rebound in tourism.

The report forecasted high inflation in the year 2006 as well due to full adjustments in oil process and low agricultural production.

The report however projected the GDP to pick up to 3.4% in FY2007, assuming normal weather and greater public and private investment.

The report further said, South Asia’s growth is expected to moderate to 7.3% in 2006 as a result of some slowing in India and Pakistan, but then rise slightly to 7.5% in 2007. The region grew 7.8% in 2005.

"Average inflation for the region in 2006 is expected to increase to 6.1% as removal of subsidies on some petroleum products in a number of countries boosts domestic prices. Most countries are projected to see somewhat larger current account deficits with the regional average projected at 3% of GDP," the report adds.

The report said that recovery on agriculture, pick up in the industrial growth, stable contribution of the services sector, strong consumption as good monsoon supported rural incomes and higher investment as factors for high growth rate of South Asia in 2005.

"Evidence is growing that South Asia is moving on to a higher growth path. But future growth will require progress on reforms across the region," a ADB press statement quoted ADB Chief Economist Ifzal Ali as saying.

The ADB report warned that the global tide of bilateralism in trade agreements could pose significant risks to the multilateral trading system.

"Developing countries with small markets and which already face significant difficulties in getting their goods into the international marketplace are poorly positioned in the race to link up through new trade deals," Ali added.

By some estimates, as many as 300 bilateral agreements will be in force around the world by the end of 2006.

A similar report published by the United Nations Economic and Social Survey of Asia and the Pacific (UN-ESCAP) 2006 has estimated 2.6 percent GDP growth rate in the fiscal year 2005.

"With higher petroleum prices, expiration of the WTO agreement in textiles and clothing and intensified civil strife, GDP growth in Nepal could fall short of the 4.5 percent rate projected for 2006," the report added. nepalnews.com pb Apr 06 06