Economy Faring Better

Nepal's ailing economy has shown a sign of improvement. Nepal Rastra Bank says that the national economy is heading on a right track. An ambitious goal of growth may not be attainable in the short run but the positive indicators raise a ray of hope in the turbulent times.

There is a slight decline in inflation and the upturn in remittances can provide a respite to the economy facing external pressure for the past one and a half years. An NRB macroeconomic report covering the past 10 months of the current fiscal year states that the country has made modest gains in foreign currency reserves, balance of payments, current account balances, and remittance inflows.

The report released on Friday said that consumer inflation in the first nine months of the current fiscal year stood at 7.41 per cent, compared to 7.87 per cent in the previous fiscal year. Inflation has been found to have decreased slightly in the past year.

However, inflation is still higher than the target. The government had planned to keep inflation at 7 per cent in its current fiscal year budget. The inflation of the food and beverages group was 5.54 per cent while the inflation of the non-food and services group was 8.89 per cent.

Under the food group, the highest price increase was 26.61 per cent for marmalade, and under the non-food group, the entertainment and culture subgroup saw the highest price increase of 15.75 per cent. However, with the devaluation of the Nepali rupee, the prices of food, dairy products, household consumables, imported goods and fuels have increased.

There has been a significant rise in the inflow of remittance into Nepal during the review period. Remittance is one of the major contributing factors to increasing household income and the country’s GDP. The flow of capital from immigrants to families back home has increased by 23.4 per cent to Rs. 1,005.18 billion in the review period, compared to an increase of only 0.5 per cent in the same period a year ago.

The country has received remittances of around Rs. 102 billion in the one-month period of mid-April to mid-May alone. Remittances have the potential to improve family welfare, reduce poverty and economic vulnerabilities. Remittance inflows increased by 13.4 per cent to 7.70 billion dollars in the review period, compared to a decrease of 1.2 per cent in the same period the previous year.

Various countries across the globe have been reeling from the economic downturn in the aftermath of the COVID-19 pandemic and Nepal cannot be an exception. The national economy had been under extra pressure due to internal operational glitches as well.

Being directly affected by the overlapping crises of the pandemic and the Russia-Ukraine war, the surge in food grains and fuel prices are painful reminder that the government needs to address the issue on time. With the trend of remittance inflow improving and tourism activities reviving, there is a new hope that the economy will see a steady improvement and much needed growth.