Good news, however, is the country could win better growth rate of 4 percent in the next fiscal year ending mid-July 2012, says the Global Economic Prospects 2011 released on Friday.[break]
Sadly, the report has gloomy pictures to relay to the Nepali policymakers and general consumers, who witnessed standstill on policy implementation and political stalemate eating away economic activity, contributing to lackluster growth in 2010.
For instance, the report says the countries in South Asia will find growth rates in remittances inflow halve to 5.1 percent in 2011 from 10.3 percent recorded in 2010.
“Migrant deployments from South Asia have slowed sharply and demand for migrants from the Gulf countries too is expected to plateau with the completion of several large construction projects,” the report states, explaining factors for such projection.
Although Nepal´s case is slightly different, as it has not recorded any slowdown on workers exports in the Gulf countries, figures of Nepal Rastra Bank suggest that the country is still struggling to get remittances inflow grow to the extent the workers are leaving the country.
The report, however, projects the remittances inflow to accelerate in 2012 and attributes such projection to strengthening in high-income country growth rate.
It also portrays grim prospect of Nepal narrowing down trade deficit. “The pace of growth of imports will continue to outpace that of exports,” says the report. This, along with slowed remittances growth projection, will add more worries to the policymakers and the central bank is already finding it tough to contain balance of payment deficit.
The World Bank report adds that high inflation could continue to challenge the policymakers and general consumers in Nepal as well as other South Asian countries over the next two fiscal years.
It recommends the policymakers to go for macroeconomic policy tightening, but assesses that the task is complicated by the desire to maintain the pace of growth, particularly growth-enhancing infrastructure investments.
India, China lead global growth
Contrary to Nepal´s low growth, the report says its southern neighbor - India - will grow at 8.4 percent in 2011 and 8.7 percent in 2012. Supported by firm net private capital inflows and domestic demand, it even projects India to lead South Asia´s growth to average at 7.7 percent and 8.1 percent respectively over this and the next fiscal year.
Likewise, Nepal´s northern neighbor, China, too will grow at 8.7 percent and 8.4 percent respectively in 2011 and 2012, according to the report.
Together, India and China led gross domestic product (GDP) in low and middle income countries to expand by 7 percent in 2010. Excluding India and China, those countries had grown at just 5.2 percent during the year.
The report forecasts that strong growth of domestic demand in developing countries will continue to lead the world economy over the next two years.
Attributing to high growth rate of China and India, the report projects GDP in low and middle income countries to expand at 6 percent in 2011 and 6.1 percent in 2012.
“Their growth rate will clearly outstrip growth in the high income countries, which is projected to remain at 2.4 percent in 2011 and 2.7 percent in 2012,” reads the report.
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