World Bank Cautions Nepali Economy on Key Risk Factors

While the growth is expected to be strong in the mid-term, WB said the country will need to consider few risk factors in its way forward

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World Bank Cautions Nepali Economy on Key Risk Factors

After the Asian Development Bank (ADB), now the World Bank (WB) released its report on Nepal’s economic growth prospects for the future.

In its latest South Asia economic outlook report on April 07, 2019, WB noted that Nepal is poised for a 6 percent economic growth rate in FY 2018-19.

“In Nepal, GDP growth is projected to average 6 percent over the medium term. The services sector is forecast to benefit from strong tourism and manufacturing will be supported by the opening of Nepal’s largest cement factory next year,” WB said in its release.

While the growth is expected to be strong in the mid-term, WB said the country will need to consider few risk factors in its way forward.

World Bank’s Risk Factors for Nepal Economy include:

Constraints in Reform implementation
Vulnerability to Natural Disasters
Slow-paced reforms to rise private investment, especially foreign investment
Resource availability
Supporting federalism
Hit to Remittance Inflows
Sustaining Service delivery
Credit constraints as banks limit lending to meet the Credit To Core Capital Plus Deposit (CCD) ratio regulatory limit
Fiscal discipline at the local level

“The poverty outlook is especially sensitive to remittance inflows, natural disasters and local level implementation capacity constraints that may hamper service delivery…”

“The transfer of financial management staff over a year ago made it possible for local governments to prepare budgets and receive fiscal transfers of 8 percent of GDP in FY2018/19. However, under-spending of the budget persists,” WB said in its release.

However, WB economic growth projections for Nepal for FY 2019 are below ADB’s expectations of 6.5 percent, IMF’s 6. 5 percent and the government’s own target of 8 percent.

“In Nepal, GDP growth is projected to average 6 percent over the medium term. The services sector is forecast to benefit from strong tourism, and manufacturing will be supported by the opening of Nepal’s largest cement factory next year,” the report added.

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