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Kathmandu, April 12

The World Bank has made sharp adjustments to Nepal’s economic outlook in the wake of the coronavirus crisis, downgrading gross domestic product growth estimate between 1.5 per cent and 2.8 per cent for the current fiscal year. These projections — the lowest since the impact of the devastating 2015 earthquakes were felt — are way below the government’s growth target of 8.5 per cent for this fiscal and WB’s own pre-COVID-19 forecast of 6.4 per cent.

What is even more worrisome is that the economy is unlikely to bounce back strongly in the next two fiscals, as the US-based multilateral lender has projected Nepal’s GDP growth to hover between 1.4 per cent and 2.9 per cent in the next fiscal and between 2.7 per cent and 3.6 per cent in fiscal 2021-22.

“We all know that COVID-19 will hit South Asia (including Nepal) very hard (economically). The official numbers of infections seem to be low in the region compared to western countries but they are growing faster. So the worst may be yet to come,” WB Vice-president for South Asia Hartwig Schafer told selected South Asian journalists via conference call.

COVID-19 threat has prompted Nepal to lock itself down since March 24 to contain the spread of the disease. The government’s measure has gained widespread support  considering the country’s fragile healthcare system, but it has come at a huge economic cost as it has led to closure of almost everything, rendered many jobless and raised the prospect of many falling back into the poverty trap.

A lockdown of two to four months could cut manufacturing and service sector output by half during that period, states the WB’s South Asia Economic Update launched today.

Although this unprecedented crisis will badly affect all sectors of the economy, one area that will receive the severest blow is services, especially labour-intensive service sectors, where workers earn less, have fewer years of schooling and are more likely to be self-employed or unpaid. Some of the major labour-intensive service sectors are: retail trade, which includes mom-and-pop and apparel stores; land transportation; personal services, which include motorcycle workshops and beauty parlours; and accommodations, such as hotels, and restaurants. For every US$1 million of foregone demand in these sectors in Nepal, at least 250 employment opportunities may be lost, according to WB estimates.

This crisis will affect manufacturing sector too. But the magnitude of possible harm would be less severe because goods can be stored for future use and production can be ram

Read the full story on The Himalayan Times

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