NRB Economic Outlook

Economy gradually gaining traction

Published On: October 22, 2016 12:50 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Oct 22: The economic situation of the country is gradually gaining traction following a tumultuous year, according to the Nepal Rastra Bank (NRB).

Unveiling the Current Macroeconomic and Financial Situation of Nepal (Based on Two Months' Data) of Fiscal Year 2016/17, the central bank concluded that the macroeconomic condition was gaining traction with rising capital expenditure, rebound in industrial output along with promising summer crops. 

According to the report, the total capital expenditure in the first two months of the current fiscal year remained at Rs 1.29 billion compared to Rs 436 million in the corresponding period of the last fiscal year. While the central bank has not shared the data about industrial output, it said that the yield of summer crops is expected to improve on account of ample rainfall coupled with easy availability of agricultural inputs during the review period. 
The economic outlook of the central bank stated that capacity utilization of manufacturing industries has expanded following the improvement in energy and supply of raw materials.

"The bed occupancy rate of tourist standard hotels has increased in the review period as compared to the same period of the previous year. This signals a gradual turnaround in tourism industry," reads the economic outlook. 

Inflation, as measured through consumer price index (CPI), also moderated to 7.9 percent in mid-September from 8.6 percent in mid-August, shows the report.

While many macroeconomic indicators have fared better in the review period, the balance of payment (BoP) recorded a deficit of Rs 3.5 billion, according to the data. 

BoP refers to the difference in total value between payments into and out of a country over a period. The country had registered a BoP surplus of Rs 31.88 billion in the same period last year. 

The rise in capital expenditure, albeit slowly, surge in import bill and trade deficit, increase in dividend payments on foreign investment, decrease in foreign grants, and slackness in remittances inflow have been attributed for BoP deficit in the review period.

Though remittances inflow has increased in the second month compared to the negative growth in the first month, it grew by only 6.6 percent to Rs 114.74 billion in the review period compared to a growth of 27.5 percent in the corresponding period of the last fiscal year. Remittances growth of only 6.6 percent is still worrisome as the eve of the festival season is the time when migrant workers tend to send more money to their family, according to economists. 

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