DOCKING NEPALS ECONOMIC ANALYSIS

NEPAL ECONOMIC FORUM

(JUNE 2012)

Presented by: Shubhekchha Neupane

CASE OVERVIEW

INTERNATIONAL ECONOMY

Nokia in trouble
(first quarter operating loss of 1.7 billion)

Gold price increase

(price surged past US dollar 1,600)

Dollar raises against the rupees

(outflow of capital from India)

India cuts interest rates

(cut half a percentage for the first time in three years)

China moves towards currency liberalization

(loosening the trading bond limits for Yuan)

According to the International Monetary Fund (IMF) world GDP is set to rise by 3.5% this year and by 4.1% in 2013. Nepal will be able to enjoy the trickle down effects of economic growth - specially from increasing labor demand. Other than from remittance Nepals link to the global economy is limited. The slowing down of the Indian and Chinese Economies suggest that the future holds challenges for the Nepalese economy.

ACCORDING TO CENTRAL BUREAU OF STATISTICS (CBS)

GDP

for fiscal year 2000/01 : NPR 413 billion GDP for fiscal year 2010/11 : NPR 637 billion
Gross

National Income in 2000/01 : NPR 19,144 Gross National Income in 2010/11 : NPR 46,859

CASE ANALYSIS

AGRICULTURE

The agricultural budget increased by 17.87% to NPR 384.9 billion. NRB made it mandatory for banks and financial institutions to ensure that the agriculture sector accounts for at least 10% of total lending by July 2014

EDUCATION

Fee ceiling set for private schools Campaign of proving primary education to all children by 2015 Vocational subjects soon to be an integral part of school education.

ENERGY

For the fifth time in current fiscal year, there has been a hike in the price of petroleum products. According to NOC, approximately 531 megawatt of electricity is generated through the use of diesel. LGP Consumer Cards issued.

FOREIGN AID

Japan provides grant of NPR 580 million for the Sindhuli Road Project. Germany pledged NPR 1.06 billion towards health sector reforms. Nepal is likely to lose at least NPR 430 million in annual aid assistance from Canada. ADB to assist in urban development (NPR 931 million)

HEALTH

School Health and Nutrition Project gains ground in VDCs (546 primary schools in 60 VDCs)
No polio detected in Nepal for 20 months Health ministry to table human resource plan)

TRADE

Nepal dropped 21 places in the last five years in Global Logistics Performance Report. Trade deficit stands at USD 3.2 billion

Decrease in the import of high value goods such as vehicles, cement, rods, etc Increase in the import of low value goods such as food, readymade garments and luxury items such as shoes.

REMITTANCE

In the period of 7 months, starting from September 2011, Nepali insurance companies have sold insurance policies worth NPR 594.1 million. Migrant workers number increase almost 19% compared to last year. Worker demand more than supply.

CONCLUSION

Agriculture

To protect local farmers the government also needs to implement strict measures when it comes to informal trade of agricultural commodities.

Education

The government is seeking to improve education levels through its school enrollment programs while increasing the impact of education by improving the quality of education through education in mother tongue.

Energy

Alternative and renewable sources of energy such as biogas, solar energy and wind must be looked into to arrive at a long term solution for the country.

Health

Nepal continues to show improvement in most of its health indicators with the exception of neo natal mortality.

Foreign Aid

Aid effectiveness continues to be ineffective due to a lack of transparency in the flow or distribution of foreign aid. It is necessary to internalize international tools like the International Aid Transparency Initiative (IATI) to ensure financial transparency.

Trade

If Nepal is to increase its global competitiveness and integrate into the world economy , it needs to focus on creating the right policies and infrastructure.

Remittance

In the long run a remittance dependent economy will be dependent on the success of other economies. Indirect benefit of remittance includes increase in business for insurance companies; increase in financial service agencies. It leads to increase in liquidity and in turn improving access to capital in Nepal.

THANK YOU!!!