Kathmandu: World Bank has forecasted the gross domestic production(GDP) of Nepal to remain 3.9 in FY 22. In a fresh report made public by World Bank states that the economy is expected to recover steadily but gradually from FY21 onward.
Assuming a successful vaccination rollout domestically and globally, and a gradual resumption of international tourism, real GDP is projected to grow by 3.9 percent in FY22. Growth is expected to be driven by services as social distancing eases up further, and by agriculture, on the back of recent favorable monsoons. However, the pandemic is expected to have lasting effects. Without reforms to readjust towards a post-COVID-19 tourism market that includes improvements to nature-based tourism, enhanced infrastructure for better access, environmental management, and tourism diversification, the sector may not fully recover. This would stall the growth recovery, limiting its resilience. Tepid exports of goods, and services, matched against increasing imports, as consumption returns to normal, would widen the current account deficit to 3.2 percent of GDP by FY22.
The fiscal deficit is projected to remain elevated but to stabilize gradually over the medium term. Revenue performance is expected to remain weak, and the additional spending will be required for economic relief measures, vaccinations, and the resumption of project implementation. As a result, the fiscal deficit is expected to widen to just under 8 percent of GDP in FY22 and public debt is projected to reach 46.7 percent of GDP by FY22. However, the country’s debt will remain sustainable.
The economic outlook is subject to significant downside risks. The recent political uncertainty, if prolonged, may further undermine investment sentiment. On the upside, effective vaccination campaigns could facilitate a resumption of tourism and hospitality services. A resilient recovery could be further supported by investments, to enhance quality, market access, and livelihood opportunities for local communities in tourism and related value chains.
