Although the growth forecast is the same as what it unveiled in April 2010, the fresh World Economic Outlook 2010, which IMF released on Wednesday, contains some good news for Nepali consumers as well as exporters.[break]
For instance, IMF says Nepal´s inflation that adamantly stood firm on double digit figure over the last two fiscal years will ultimately moderate to 6.8 percent in 2010/11. If the country managed to attain that, it will largely relieve general consumers, particularly low income households that braved 13.2 percent rise in consumer prices in fiscal year ending 2009 and 10.5 percent in 2010.
The report further states that the global GDP has bounced back at the rate better than what it anticipated earlier. IMF has predicted the global economic growth to stand at 4.8 percent for 2010.
Although the global growth is expected to slow to 4.2 percent in 2011, the report maintains that consumption and real demand of the advanced economies, which form key markets for Nepali exports, will remain better than the last two years.
"The real domestic demand of advanced economies will grow to 2.6 percent in 2010, as compared to a decline of 3.5 percent recorded in 2009," states the report. In 2011, the demand is estimated to slow to 1.9 percent, but the figure is still much better than that of 2009.
The report mainly notes that the demand in the US will grow to 3 percent in 2010 and 2.2 percent in 2011, compared to a decline of 3.6 percent in 2009. Likewise, demand in the eurozone will jump to 1 percent in 2010 and 0.9 percent in 2011, as against a decline of 3.4 percent the zone recorded in 2009.
The growth of consumption in the US and the Euro areas will widen up scope for Nepali exporters to regain customers for their exports like hand-knotted woolen carpet, readymade garment, pashmina, silver jewelries and tea, among others.
On the back of increased demand, the latest World Economic Outlook has projected the world trade to expand by 11.4 percent in 2010 and 7 percent in 2011, compared to negative growth of 11 percent in 2009.
"Mainly imports of advanced economies are estimated to jump to 10.1 percent in 2010 and 5.2 percent in 2011," says the report.
In 2009, imports of advanced economies had shrunk by 12.7 percent.
Likewise, IMF says that imports of emerging as well as developing countries, which form another crucial market segments for Nepali exporters, will grow by 14.3 percent in 2010 and 9.9 percent in 2011. Imports of those countries had declined by 8.2 percent in 2009.
The report notes that the growth in emerging and developing economies will be much stronger than the initial forecast and will remain at 7.1 percent in 2010 and 6.4 percent in 2011.
The most underlining development is that the growth appears not only strong but also sustainable as private sectors´ demand in the region is straightening, says the report.
Among others, IMF estimates Nepal´s current account balance to improve in the new fiscal year.
According to the report, Nepal´s current account deficit, which stood at some 2.9 pc of gross domestic product in the fiscal year ending mid-July 2010, will drop to 0.1 percent of the GDP.
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