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VOL. 28, NO. 25, April 03, 2009 (Chaitra 21 2065)
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Nepal’s Performance
UN ESCAP Report points out that countries like Nepal will have to face most difficult time in the context of global economical crisis
- BY A CORRESPONDENT
If Nepal’s ongoing state of economy is any indication, Nepal’s chances to meet the Millennium Development Goal by 2015 are very bleak. As global economic crisis is deepening further creating more troubles in coming years, remittances seem to be going down next year making rural areas more prone to poverty.
“It is very difficult to achieve the MDGs due the global economic crisis,” said UNDP resident representative Robert Piper. “The whole region is in a very difficult position and everything will be determined by how things move.”
Thanks to increase in the remittances by more than 50 percent to roughly 2.2 billion in 2008, helping to move the current account deficit into surplus in 2008, there is very positive implication for the poverty reduction.
“As the indication is already coming that the demand of workers is shrinking. “ It is too early but we can feel the implication of global economic crisis by 2010,” said Lohani. “This will definite to affect the MDG.”
In the year, 2008 Nepal made a good progress. “Despite a weak performance in merchandize exports and manufacturing, the growth was supported by a satisfactory expansion in agriculture, encouraging increases in tourism and some improvements in services. Overseas workers’ remittances have been growing and continue to play a major role in the growth of the economy by stimulating domestic consumption. Nepal’s GDP growth is expected to grow around 5 percent in 2009.However, global financial crisis and economic slowdown may have even a stronger adverse impact on GDP growth,” writes Economic and Social Survey of Asia and the Pacific 2009.
Launched by Resident Representative of UNDP Robert Piper, the Survey revealed that inflation has been driven up in all the countries in South Asia, partly by unrelenting pressures from higher international commodity prices of oil, basic metals and selected food items.
According to the report, because of Nepal’s fixed exchange rate with the Indian rupee and the fact that India is a major source of imports, inflation in the country is also heavily influenced by price developments in India.
Nepal’s improved political stability, transition towards stable democracy and more conducive investment climate are expected to pave the way for a more robust economic performance over the medium term. Nepal’s GDP grew at 5.6 percent in 2008, compared with 2.6 percent in 2007.
“Poverty and hunger levels increased as a result of sharp increase in food prices. Therefore, there is a need to strengthen the social foundation through more effective social protection systems. Social protection should not be crisis-driven, rather it should be designed as a way of creating resilient and inclusive societies that guarantee universal access to basic social services and income security for all,” said Jyoti Lohani, commenting on the report.
“The global financial crisis and its adverse impact on real economies deserve immediate attention and coordinated policy responses to revive and accelerate economic growth. At the same time, we have to rethink where that growth takes place and whom it benefits.”
Commodity price volatility and threat of climate change pose fundamental long-term challenges. The crises call for a comprehensive and coordinated response to address the impacts and make our development process truly inclusive and sustainable. Fiscal stimulus packages, besides reviving economies, should be used to strengthen social protection system and promote sustainable development.
Despite a weak performance in merchandise exports and manufacturing, the growth was supported by a satisfactory expansion in agriculture, an encouraging increase in tourism and some improvements in services.
Overseas workers’ remittances have been growing, and continue to play a major role in the growth of the economy by stimulating domestic consumption. The country’s GDP is expected to grow around 5 percent in 2009. However, the global financial crisis and economic slowdown may have even a stronger adverse impact on GDP growth.
“Fiscal stimulus packages have to be implemented in a swift and coordinated manner.
Furthermore, public spending will come under increased scrutiny by the people whom governments represent thus putting a special onus on governments to implement in a transparent and responsible manner,” said Lohani.
Experts argue that fiscal resources are limited. A longer term planning horizon needs to be adopted that ensures that current expenditures have the highest rates of return so that Nepal can cope with the coming crisis.
