ADB projects 4 pc GDP growth for Nepal

The Asian Development Bank (ADB) has projected 4 percent GDP growth for Nepal in the current fiscal year.

In its South Asia Economic Report, the bank has said, "The outlook has significant downside risks. The most critical risks relate to the progress in the peace talks."

The banks says recent political developments and the improved security situation could yield a significant 'peace dividend' for the economy over the next few years.

However, it has also expressed concerns of adverse affect on economy if peace talks disrupts. "Failure to sustain the ceasefire and make headway in the peace process will seriously undermine macroeconomic performance and poverty reduction," the report said.

The report further said, "In FY2007, inflation is forecast to moderate to 6.5 percent as the effects of upward adjustment in VAT and petroleum prices subside and food production returns to normal levels."

The ADB forecasts budget deficit for the current fiscal year at 3 percent of the GDP, which stood at 1.8 percent in the last fiscal year. "The FY2007 budget announced by the government is expansionary to support reconstruction, rehabilitation, and reintegration of the Maoist insurgents into Nepal's mainstream politics and development process," the bank said.

"Despite a slowdown in exports and continued recovery in imports, the current account surplus widened in FY2006 due to a sharp increase in remittances. However, the surplus is projected to decline in FY2007, as the investment climate improves and imports grow strongly," the report adds.

"In addition to increasing public and private spending on infrastructure, there is a need for better targeting of investments and in particular, for improvements in sector policies, governance, and institutional environment," a statement of the bank on Thursday quoted Juan Miranda, Director General of ADB's Central and West Asia Regional Department as saying.

The report says that intra-regional trade and investment offers immense opportunities for accelerating growth and reducing poverty in South Asia. The report says that improved governance, better quality of regulation and infrastructure can help South Asian economies emerge as the "New Tigers" of Asia. nepalnews.com ia Oct 19 06

(Click to view the South Asia Economic Report)