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Macro Economic Situation Nepal 2009-2010

Macro Economic Situation Nepal 2009-2010

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Published by Chandan Sapkota

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Published by: Chandan Sapkota on Sep 08, 2010
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09/08/2010

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1
 Current Macroeconomic Situation
 
(Based on the annual Data of 2009/10)
Real Sector
Gross Domestic Product (GDP)
 
1.
 
Based on the Preliminary estimate of the Central Bureau of Statistics, the gross domesticproduct (GDP) has witnessed a growth of 3.5 percent at basic price and 4.6 percent atproducer's price in 2009/10. Such growth rates were 3.9 percent and 4.9 percentrespectively in 2008/09.2.
 
The agriculture and non-agriculture sectors are estimated to grow at 1.1 percent and 5.1percent respectively in 2009/10. Such growth rates were 3.0 percent and 4.7 percentrespectively in the previous year.3.
 
As a consequence of the adverse monsoon, the production of paddy declined by 11.0percent in 2009/10 in contrast to a growth of 5.2 percent in the previous year. Theproduction of maize declined by 3.9 percent in the review year. However, the production of wheat, barley and millet is estimated to grow by 15.8 percent, 18.8 percent and 2.3 percentrespectively in the review year. Similarly, the production of fruits and vegetables increasedby 2.7 percent and 8.9 percent respectively in the review year.
Consumption, Investment and Savings
 
4.
 
The ratio of gross consumption to GDP increased by 0.3 percentage point to 90.6 percent in2009/10, thereby pushing the ratio of gross domestic savings to GDP reached to 9.4percent. The ratio of Gross capital formation to GDP recorded 38.2 percent in 2009/10, asagainst 31.9 percent in the previous year. The ratio of gross fixed capital formation to GDPstood at 21.3 percent in the review year, this is at par with the ratio of the previous year.
Gross National Disposable Income (GNDI)
 
5.
 
The gross national disposable income (GNDI), which includes the worker's remittanceinflow and net transfer in gross national income, is estimated to increase by 18.1 percent in2009/10. In the previous year, GNDI had increased by 24.5 percent. In the review year, theratio of GNDI to GDP is expected to reach 125.1 percent. In the previous year such ratiowas 126.4 percent.
Tourist Arrival
 
6.
 
The number of tourist arrival by air increased by 12.8 percent to 4,11,584 in 2009/10 fromthat of 3,64,830 in 2008/09. In the review year, the share of tourist arrival from India andthird countries by air recorded a growth of 22.1 percent and 77.9 percent respectively. Inthe previous year, such shares were 24.1 percent and 75.9 percent respectively.7.
 
In the review year, the number of tourists arrival from third countries increased by 15.7percent to 3,20,468. The number of tourist arrival from third countries had decreased by 0.5percent in the previous year. In the review year, the number of tourist arrival from Indiaincreased by 3.8 percent to 91,117, as against a decline of 2.3 percent in the previous year.
 
 
2
Foreign Direct Investment
 
8.
 
The commitment for foreign direct investment in the review year increased as aconsequence of the gradual improvement in the peace and security situation of the country.In the review year, the Department of Industry has given approval for the incorporation of 171 joint venture projects with foreign investment equivalent to Rs. 9.1 billion. In theprevious year, the number of such approval accounted to 230 with a total foreign capital of Rs. 6.3 billion. Out of total joint venture investment, 50 are related to tourism, 72 arerelated to services, 37 are related to manufacturing, 1 is related to construction, 2 arerelated to agriculture, 5 are related to energy and the remaining 4 are related to mining. Of the total approved foreign investment projects, manufacturing sector witnessed the highestgrowth of 121.1 percent, as against at most reduction of 96.7 percent in the agriculturalsector compared to the previous year.9.
 
From all the approved projects, 7,848 people are expected to get employment. In the reviewyear, 34 countries were given approval for foreign investment. Country-wise analysisshows that the investment commitment from India secures the topmost position followedby Mauritius, Canada and China.
Foreign Employment
 
10.
 
The Department of Foreign Employment, Government of Nepal granted final approval to2,17,164 people for foreign employment in 2008/09. This number has surged by 35.4percent to 2,94,094 in 2009/10.
11.
 
In 2009/10, the number of people granted permission for the employment in Malaysia stoodat 1,13,933, which is a substantial rise of 240.7 percent in comparison to the previous year.Of the total number of people granted permission for foreign employment, approximately38.5 percent find their way to Malaysia followed by Saudi Arab, Qatar and United ArabEmirates. While Qatar served as the major foreign employment destination for Nepal up to2008/09, Malaysia secured the top position in 2009/10.
 
Inflation
Consumer Price Inflation
 
12.
 
The annual average consumer price inflation moderated to 10.5 percent in 2009/10compared to an increase of 13.2 percent in 2008/09. Despite a substantial rise of 15.4percent in the prices of food and beverages group, the annual average consumer priceinflation moderated on account of a low increment by 4.7 percent in the prices of non-foodand services group. The index of food and beverages and non-food and services hadincreased by 16.7 percent and 9.5 percent respectively in 2008/09. The y-o-y consumerprice index rose by 10.1 percent in Mid-July 2010, as against a rise of 11.4 percent in theprevious year.13.
 
In the review year, yearly average price index of sugar and sugar related products, the itemunder food and beverages group increased by a whopping rate of 45.6 percent, it hadincreased by 45.9 percent in the previous year. Similarly, the annual average price indicesof spices, pulses, meat, fish and eggs went up by 27.3 percent, 26.1 percent and 20.6percent respectively compared to their respective rise of 12.3 percent, 25.0 percent and 23.4percent in the previous year. The annual price index of vegetables and fruits grew by 19.9percent compared to a 12.7 percent rise in the previous year. Likewise, the annual price
 
 
3
indices of restaurant meals, beverages, milk and milk products increased by 16.8 percent,14.6 percent and 11.9 percent respectively compared to their respective increase of 18.5percent, 12.7 percent and 15.0 percent in the previous year. In 2009/10, the index of oil andghee declined by 4.6 percent as against a rise of 16.3 percent in the previous year.14.
 
Under the non-food and services group, the yearly average indices of sewing services aswell as tobacco and related products rose up by 13.0 percent and 12.1 percent respectivelycompared to their respective rise of 10.6 percent and 15.4 percent in the previous year.Similarly, the annual price index of education, reading and recreation group witnessed agrowth of 10.7 percent, as against a rise of 8.9 percent in the previous year.15.
 
Region-wise, annual average price indices of Kathmandu Valley, Terai and Hills in thereview year increased by 9.7 percent, 10.7 percent and 11.2 percent respectively. In the lastyear, such indices had risen by 14.3 percent, 12.8 percent and 12.7 percent respectively.16.
 
The annual average core inflation in the review year rose by 11.7 percent in 2009/10compared to a 12.6 percent rise in the previous year. The y-o-y core inflation went up by11.2 percent in Mid-July 2010 compared to a 12.5 percent rise in the previous year.
Wholesale Price Inflation
 
17.
 
The annual average wholesale price inflation rose by 12.6 percent in 2009/10 compared toa 12.8 percent rise in the previous year. The annual average price indices of agriculturalcommodities and domestic manufactured commodities increased by 22.8 percent and 8.6percent respectively compared to their respective rise of 14.0 percent and 10.9 percent inthe previous year. The annual average index of imported commodities declined by 1.2percent in contrast to a rise of 12.1 percent in the previous year. The y-o-y wholesale priceinflation moved up by 7.0 percent in mid-July 2010 compared to an increase of 15.3percent in the previous year.18.
 
Within the agricultural commodities group, the annual average price indices of cash crops,spices and livestock production rose by 38.0 percent, 37.6 percent and 31.0 percentrespectively compared to their respective rise of 4.1 percent, 11.4 percent and 26.3 percenta year ago.19.
 
The annual average price indices of beverages and tobacco, food related products andconstruction materials, within domestic manufactured commodities group rose by 13.4percent, 12.5 percent and 4.0 percent respectively in comparison to their respective rise of 11.7 percent, 11.4 percent and 11.1 percent in the previous year.20.
 
Within the imported commodities group, the annual average price indices of Drugs andMedicine as well as textile-related products increased by 7.5 percent and 3.0 percentrespectively compared to their respective increase of 5.9 percent and 15.6 percent in theprevious year. Annual average Price index of petroleum products and coal declined by 4.8percent in contrast to a rise of 10.4 percent last year.
National Salary and Wage Rate Index
 
21.
 
The annual average salary and wage rate index rose by 17.2 percent in 2009/10. It hadincreased by 15.3 percent in the previous year. In the review year, annual average priceindex of salary as well as wage rate went up by 20.2 percent and 16.3 percent respectivelycompared to their respective rise of 10.5 percent and 16.9 percent in the previous year. Theannual salary index of civil servants, staff of public enterprises, army and police and

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