According to ‘Current Macroeconomic Situation of Nepal Based on Nine Months Data of 2014/15’ unveiled by Nepal Rastra Bank (NRB), inflation cooled down in the ninth month of fiscal year 2014/15 as indices of food and beverage group and non-food and services group dropped further in the review period compared to the corresponding period of last fiscal year.
Data shows that indices of food and beverage group and non-food and services group increased by 8.7 percent and 5.3 percent, respectively, in the review period. Such indices had increased by 12.3 percent and 7 percent, respectively, in the same period of last fiscal year.
NRB officials have attributed the fall in inflation to drop in the price of petroleum products and Indian inflation rate.
“Inflation in India has come down in recent months followed by the significant drop in price of petroleum products in the international market. Since Nepal’s market is closely connected with the Indian market, inflation here is on a downward trend for past few months,” NRB spokesperson Min Bahadur Shrestha told Republica.
Analysts, however, say that the earthquake is likely to make impact on various economic indicators in the macro economic situation for the coming months.
TRADE DEFICIT CONTINUES TO WIDEN
Country’s trade deficit continued to balloon in the first nine months of 2014/15 as country’s import surpassed exports significantly. According to the data, total trade deficit during the nine months of 2014/15 grew by 12.9 percent to Rs 512.83 billion compared to a rise of 29.1 percent in the same period of the 2013/14.
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As usual, trade deficit with India remained the highest followed by China and other countries. “Trade deficit with India, China and other countries increased by 6.5 percent, 53.5 percent and 11.8 percent, respectively, during the review period. Such deficits had increased by 30.4 percent, 14.6 percent and 33.8 percent, respectively, in the same period of 2013/14,” the report states.
Country’s merchandise exports decreased by 5.6 percent to Rs 64.28 billion in the nine-month period compared to a rise of 19.2 percent to Rs 68.12 billion in the same period of previous fiscal year. While exports to India decreased by 8.2 percent in the review period, export to China, the second biggest trading partner of Nepal, increased by 8.1 percent.
Merchandise imports, however, increased by 10.5 percent to Rs 577.11 billion. Such imports had gone up by 27.7 percent to Rs 522.19 billion in the same period of previous fiscal year.
“Import growth remained low mainly due to drop in the price of petroleum products and fall in imports of gold, betel nut, MS Wire, coal, yarn, among others,” the report states.
BOP SURPLUS, REMITTANCE GROWTH RATE DOWN
Remittance growth rate fell significantly over the first ninth months of the current fiscal year. While workers’ remittance under transfers increased by 31.5 percent in the same period of last fiscal year, it increased by mere 7.1 percent in the nine-month period to Rs 426.19 billion.
NRB Spokesperson Shrestha said though remittance flow was low in the review period is low compared to the data of corresponding period of last year; the growth rate has been increasing in recent months of the current fiscal year.
“Remittance is increasing, but a large part of such workers’ transfer comes to the country through informal channel which is not recorded in the data,” Shrestha said. “However, the remittance flow rate is increasing if you compared on month-on-month basis as we have been strictly monitoring remittance flow to encourage use of formal channel,” he added.
The slow growth in remittance flow has made an impact on the Balance of Payment (BoP) situation. According to the data, the overall BOP recorded a surplus of Rs 49.40 billion during the nine months of 2014/15, compared to a surplus of Rs 106.23 billion in the same period of the previous fiscal year.
“BoP surplus was high last year as remittance flow was recording high growth. The surplus narrowed this year due to slow revenue growth,” said Shrestha.
