Wednesday 24th July 2024
Wednesday 24th July 2024
गृहपृष्ठNepalNepal’s growth to slump to 0.6 percent as coronavirus ravages economy

Nepal’s growth to slump to 0.6 percent as coronavirus ravages economy

The World Bank paints bleak economic outlook for South Asia, plunging into ‘worst-ever recession’

KATHMANDU : Nepal’s growth is projected to fall to 0.6 percent in the current fiscal year 2020/21 as the coronavirus outbreak and its subsequent containment measures continue to ravage the country’s economy.

Releasing the latest South Asia Economic Focus, the World Bank said that the lockdowns measures used to contain COVID-19 have disrupted economic activities such as tourism, and derail the growth momentum.

The twice-a-year-regional update also notes that South Asia is set to plunge into its worst-ever recession this year, as the devastating impacts of the pandemic on the region’s economies linger, taking a disproportionate toll on informal workers and pushing millions of South Asians into extreme poverty.

The report forecasts a sharper than expected economic slump across the region, with regional growth expected to contract by 7.7 percent in 2020 after topping 6 percent annually in the past five years. Regional growth is projected to rebound to 4.5 percent in 2021.

“The economic consequences of the pandemic and impact on livelihoods across Nepal is expected to be the most acute for informal workers or those without social security or assistance, who are more at risk of falling into extreme poverty,” stated Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka. “Swift action is needed to provide incomes, social protection, and employment to support them. This includes key investment climate reforms to promote physical infrastructure and access to finance for the informal sector to shorten the transition to recovery.”

Informal businesses make up around 50 percent of enterprises in Nepal and are the main source of income for the majority of the labor force. Within this group, urban informal sector workers and self-employed households in urban areas, which can fall back on subsistence farming, are more vulnerable than rural households. Many informal firms operate with limited savings and owners may face the difficult choice of either staying home and enduring starvation during the lockdown, or running their business and risking infection. These scenarios will accentuate financial difficulties as well as the spread of COVID-19.

The report urges governments to design universal social protection as well as policies that support greater productivity, skills development, and human capital. In that effort, securing international and domestic financing will help governments fund crucial programs to speed up recovery. In the long-term, digital technologies can play an essential role in creating new opportunities for informal workers, making South Asia more competitive and better integrated into markets—if countries improve digital access and support workers to take advantage of online platforms.

“COVID-19 will profoundly transform Nepal and the rest of South Asia for years to come and leave lasting scars in its economies. But there is a silver lining toward resilient recovery: the pandemic could spur innovations that improve South Asia’s future participation in global value chains, as its comparative advantage in tech services and niche tourism will likely be in higher demand as the global economy becomes more digital,” said Hans Timmer, World Bank Chief Economist for the South Asia Region.

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