Bangkok (UN Information Services) – Rising food prices, especially affecting lower income groups, and weak agricultural productivity combined with fuel and power shortages, leading to below average industrial growth, are the key concerns facing Nepal’s immediate outlook, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific, ESCAP said an expected upturn in the economy from a cessation of hostilities had failed to materialise, with overall economic growth remaining sluggish at 2.5 per cent in 2007.
But growth could rise to four per cent in 2008 if the peace process moves ahead, together with government spending to support economic activity, tourism, services and a revival in the transport sector. But the key concern remains the on-going political uncertainties.
In 2007, growth was hampered by political concerns in some areas of the country and adverse weather conditions that led to a poor agricultural performance. This undermined efforts to reduce poverty in the country, especially in rural areas.
ESCAP pointed to slow progress in technological adaptation and innovation in farm practices amid low literacy levels among the rural poor, as well as low mechanization rates, restrictions on land ownership and limited knowledge to boost rural output. It said all these factors combined to result in low agricultural productivity.
“Increased agricultural productivity is necessary to reduce poverty and income inequality,” ESCAP said. Poverty, it said, remained highest in rural areas due to almost stagnant productivity and poor weather conditions.
Nepal’s traditional industrial exports, such as ready-made garments, were weakened by supply-side constraints and increased competition from other garment-exporters entering the World Trade Organization. A concern is that Nepal’s exports are increasingly focused on the Indian market.
But positive indications were evident in on-going remittances which continued to sustain the economy by cushioning economic shocks. “Although high oil prices adversely affect the Nepalese economy, they also lead to increased demand for workers in the oil-exporting countries of Western Asia, where many Nepalese migrate to,” ESCAP said.
Other concerns over the country’s economic outlook lie in political uncertainties, frequent strikes, and shortages of power and fuel supply contributing to “sluggish export development.” ESCAP said despite liberalization of the economy, investors are seeking further institutional reforms to support development.
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052