Saturday, 7th March 2015

ADB predicts 4.5 percent growth in FY 2014

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At a time when the government is targeting 5.5 percent growth rate, country’s one of the largest multilateral donor, Asian Development Bank (ADB)  has predicted the  4.5 percent growth rate in FY 2014, up from 3.6 percent in FY 2013.

ADB has predicted this rate in its ‘Microeconomic Update February 2014’, expecting increase in agriculture production following the favorable monsoon, modest improvement in capital expenditure following the timely full FY 2014 budget and strong service sector performance supported by remittance.

The ADB also stated that the despite the timely full budget, expenditure performance has not been satisfactory, with only 30.3 percent of the total planned expenditure of  NRs517.2 billion spent in the half of FY 2014.

If the utilization of the capital budget remains at the same level as in FY 2013 (81% of total planned capital expenditure), the total capital spending in FY 2014 is projected to be about 3.5% of GDP, lower than the 4.4% of GDP projected in the budget, the report states.

ADB also expressed urgent need to ramp up both the quantum and quality of capital spending as it not only ‘crowds in’ private investments, but also helps create the foundations for the lackluster growth to take off on an employment-centric, high, inclusive and sustainable growth.

The import-based tax revenues account for around 45% of total revenue, the yearly revenue target may not be met as the depreciation of the Nepali rupee against the dollar is slowing down import demand.

In the first half of FY 2014, NRs163.4 billion revenue was mobilized which is 21.5% higher than the revenue mobilized in the corresponding period in FY 2013. However, it still is lower than the half year target set for this fiscal year.

The country’s external situation strengthened on the back of a large increase in remittance inflows, gains in exports and a slowdown in imports. In the first half of FY2014, the balance of payments surplus increased to $788.1 million, up from $89.3 million in mid-January in 2013.

This edition of Macroeconomic Update  explores the various dimensions of country’s export competitiveness. Given the country’s poor export performance so far, it is clear that Nepal has been unable to fully utilize the market access and tariff concessions offered by trading partners, primarily due to  lack of adequate and quality infrastructure; political instability and strikes; recurring labor disputes; lack of skilled human resource, deficient research and development, policy inconsistencies and implementation paralysis.

The Macroeconomic Update also stressed on country’s need to properly utilize the technical assistance offered through various financing windows by multilateral and regional trading blocs, and development partners.

Nepal is a founder member of  ADB, which was established in 1966 to improve people’s lives in Asia and the Pacific region. Nepal has been getting assistance from ADB since 1969 and received assistance of $3.61 billion until the end of 2012.