The region could also be affected by a further slowdown in China’s economic growth and natural disasters made more frequent and intense by climate change.Ĭonstrained by fiscal challenges, governments have limited room to help their economies fully capitalize on the global energy transition. Government debt in South Asian countries averaged 86% of GDP in 2022, increasing the risks of defaults, raising borrowing costs, and diverting credit away from the private sector. Regional growth prospects are subject to downside risks, including due to fragile fiscal positions. The Nepal Development Update is a companion piece to the latest South Asia Development Update, Toward Faster, Cleaner Growth, also launched today, which projects South Asia to grow by 5.8% this year-higher than any other developing country region in the world, but slower than its pre-pandemic pace and not fast enough to meet its development goals. This requires emphasis on reforms to help increase domestic productivity and reduce the inflation differential with Nepal’s trading partners.” “Improved external competitiveness is key to driving this recovery and enabling Nepal to compete in export markets, in terms of both prices and quality. “Amid challenges, Nepal is leading the way towards operationalizing its green, resilient, and inclusive development vision to shape the country’s long-term economic recovery,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. As per the report, Nepal suffers from labor productivity deficit across all three sectors – agriculture, industry, and services – compared to peer countries and its main trading partner, India. The analysis finds that the real appreciation of the exchange rate and continued low labor productivity are associated with Nepal’s lower exports. The country’s total exports amounted to 6.9% of GDP in FY23, representing only a third of the exports of other South Asian middle-income countries on average. The report also explores the drivers of external competitiveness for Nepal. However, there are multiple risks to the outlook including an erratic monsoon, which could dampen agricultural growth a renewed spike in commodity prices or continued food export bans by India which would raise prices and higher inflation which could keep policy rates elevated, increase domestic debt servicing costs, and drag on growth. Released today, the Nepal Development Update, Restoring Export Competitiveness, projects Nepal’s economy to grow by 5% in FY25. KATHMANDU, October 3, 2023- Nepal’s economy is expected to rebound to 3.9% in FY24 owing to a lagged impact of the lifting of import restrictions, strong rebound in tourism, and the gradual loosening of monetary policy, according to the World Bank’s twice-a-year country update.
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