February 18, 2017 10:32 AM NPT
Half-yearly macroecononomic highlights
• Current macroeconomic indicators show the resiliency of the Nepali economy
• Possible global rise in oil prices only threat to inflation
• Continuous deceleration in growth of remittance a matter of concern
• Recovery in tourism and industrial output likely to improve growth outlook
• Inflation moderated to 3.2% in mid-January 2017 from a peak of 12.1% mid-January 2016
KATHMANDU, Feb 18: The current macroeconomic indicators show the resiliency of Nepal’s economy, Nepal Rastra Bank (NRB) said in a report.
Releasing the ‘Current Macroeconomic and Financial Situation (Based on six months’ data of Fiscal Year 2016/17), NRB -- the central bank of the country -- said recovery in tourism and industrial output was likely to improve Nepal’s growth outlook.
A slowdown in inflation -- which hit double digits in the corresponding period of Fiscal Year 2015/16, balance of payment surplus, significant accumulation of foreign exchange reserves, and strong budgetary operations including the collection of revenue, among other fundamentals, were behind the central bank being upbeat about the economic outlook of the country.
However, a fall in remittance growth, a ballooning trade deficit, a ‘somewhat’ financial friction due to a wedge between deposits and loan mobilization of bank and financial institutions, and a significant rise in treasury surplus due to slow development expenditures are some of the indicators that have unnerved NRB.
According to the periodic report, the country’s current accounts slipped into deficit by Rs 1.08 billion in mid-January on account of sharp increase in imports.
The central bank’s data shows merchandize imports into the country jumped 67.3 percent to Rs 464.61 billion in the review period compared to a drop of 25.7 percent in the same period of the previous year. However, exports grew by just 14.8 percent in the review period to Rs 36.27 billion, widening the trade deficit to Rs 428.33 billion in the first half of the current fiscal year.
A slowdown in remittance growth in recent months has also become a major concern for the economy. Workers’ remittances increased by only 5.7 percent to Rs 342.23 billion in the review period compared to a growth of 17.3 percent in the corresponding period of the previous year.
The central bank attributed the slowdown to a drop in the number of workers going abroad for foreign employment. “The continuous deceleration in growth of remittance is a matter of concern,” the report reads.
According to data, based on final approval given for foreign employment, the number of Nepali workers seeking foreign employment went down by 9.9 percent in the first six months of Fiscal Year 2016/17 to 189,433 aspiring workers acquiring work permits from the Department of Foreign Employment.
Meanwhile, inflation, as measured through Consumer Price Index (CPI), further moderated to 3.2 percent in mid-January from a peak of 12.1 percent in mid-January 2016. “Year-on-year inflation is has continuously been decelerating in recent months mainly due to a base effect, an improved supply situation and a deceleration in Indian inflation,” the report added.