Complete education, full health could double Nepal's GDP per capita: WB

Published On: June 7, 2019 04:00 AM NPT

KATHMANDU, June 7: Nepal has the potential to double its Gross Domestic Product (GDP) per capita in the long run if it achieves the benchmarks of complete education and full health, the latest report of the World Bank states.

In the latest edition of 'Nepal Development Update' launched in Kathmandu on Thursday, the World Bank said that investment in its people could help propel Nepal toward its goal of achieving middle-income status by increasing the productivity and competitiveness of labor, leading to accelerated inclusive growth.

The report notes that investing in people and building human capital are critical if Nepal is to accelerate its growth and rapidly reduce poverty. Human capital investments raise individual earnings potential, which in turn contributes to aggregate economic growth, according to the report.For instance, one additional year of schooling in Nepal can raise an individual's earnings by 8 to 10 percent. Under-nutrition reduces learning potential and productivity and can reduce GDP by as much as 11 percent. Investing in psychosocial stimulation during a child's early years can raise his/her adult income by up to 25 percent. The report makes a compelling case for focusing on the financing to meet needs of education, health services and access and skills development across the country.

“Investing in people so that all citizens of Nepal are able to achieve full education and health to perform at their full potential will be critical in order to sustain the recent high levels of growth and increase competitiveness,” Kene Ezemenari, World Bank Senior Economist and author of the update, said at a program organized to launch the report. “This will require reducing inequities in access to services, improving the quality of services and minimizing household vulnerabilities to shocks.”

Also speaking at the program, Minister for Finance, Yuba Raj Khatiwada, said that reducing human capital gap was a focus of the government. “Our utmost priority remains the development of our children and youth. We need to scope up and maintain sustainable investments in the younger generation to ensure they remain productive and competitive with the global workforce,” he added. “We have initiated a number of reforms and policies to strengthen the investment and business environment and attract foreign investment.”

According to Khatiwada, the recently-released budget has been carefully designed to ensure an enhancement of education, health and drinking water sectors and creation of job opportunities in the country to ensure people's fundamental rights.

Inequity in access to services, poor quality of service and vulnerabilities to shocks are three key challenges that the report has identified that could hold back efforts to scale-up human capital.


Meanwhile, the report also said that Nepal's economic growth is estimated to reach 7.1 percent in the current fiscal year, driven by the service and agriculture sectors.

The service sector is likely to grow by 7.5 percent due to a boost in retail, hotel, and restaurant subsectors, driven by an increase in tourist arrivals and remittance-fueled private consumption, the report states.

“Good monsoons, increased commercialization, availability of fertilizers and seeds, and improved irrigation facilities have supported growth in the agriculture sector. Finally, improved power availability from increased electricity generation is expected to support higher growth in industry,” read the report.

The report highlights the need for more exports if Nepal is to sustain the recent high levels of economic growth. Over the medium term, the report projects that GDP will grow at 6.5 percent on average, driven by private investment and consumption. Inflation is expected to pick up slightly but will remain below 5 percent during the forecast period, assuming stable agricultural production, regular supply of electricity, and low inflation in India.

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