2016年-世界发展银行全球_Nepal_Development_Update_September_2016___Powering_Recovery_32页_866kb

Nepal Development Update Summary - September 2016

Core Content

This Nepal Development Update provides an overview of the country's economic developments and outlook for the period up to September 2016. It highlights both the progress made in recovery and the ongoing challenges, with a special focus on the electricity sector and its role in Nepal's development.

Main Economic Developments

1. Global Economic Outlook and South Asia

• Global economic growth has weakened, with developing economies facing stronger headwinds.
• South Asia has remained resilient, with GDP growth reaching 7% in 2015, the fastest-growing region.
• Robust domestic demand has continued to be the main growth driver in the first half of 2016.
• India, the largest economy in the region, has shown strong growth, while Pakistan, Bangladesh, and Bhutan also experienced strengthening activity.

2. Nepal's Economic Recovery

• Nepal experienced its slowest growth in 14 years during FY2016, with real GDP growth at 0.6% (market prices).
• Post-earthquake reconstruction has started to pick up, with over 447,000 households signing reconstruction agreements and 376,000 receiving the first tranche by September 2016.
• Monsoon conditions in 2016 improved, with precipitation averaging 102% of the long-term average, leading to an expected rice production of 4.8 million tons, up from 4.2 million tons the previous year.
• Imports rebounded quickly after trade disruptions, recovering to pre-disruption levels, while exports have not yet fully recovered, leading to a trade deficit of 30% of GDP in FY2016.

3. External Sector Resilience

• Remittances remain a key support for the external sector, growing at 29.6% of GDP in FY2016, despite a slowdown in growth rates.
• The trade deficit was offset by remittances, contributing to a cumulative surplus of USD 1.3 billion or 4.1% of GDP.
• Foreign reserves reached a historic high of USD 9.7 billion, covering 14 months of imports.

4. Monetary Policy and Liquidity

• Monetary policy remained accommodative, with interest rates kept very low.
• Nepal Rastra Bank (NRB) absorbed NPR 542.6 billion in liquidity through open market operations, up from the previous year.
• A new interest rate corridor was introduced for FY2017, with the ceiling rate at 7%, the floor rate at 0.3%, and the policy rate in between.

5. Credit and Deposit Trends

• Credit growth recovered strongly, increasing by 22.6% in FY2016 compared to 19.4% in FY2015.
• Deposit growth moderated, from 23.4% to 19.1%.
• The credit-deposit ratio increased, indicating a shift in the financial system.

6. Inflation and Competitiveness

• Inflation rose to double digits, with 12% in January 2016 and 10.5% in July 2016.
• Housing and utilities inflation was the main driver, increasing by more than 10 times.
• Non-food inflation contributed six percentage points to headline inflation, up from three percentage points in FY2015.
• Despite low food and oil prices, and moderating inflation in India, Nepal's inflation remains a concern for competitiveness.

Outlook, Risks, and Challenges

1. Economic Outlook

• GDP growth is expected to recover to 5% in FY2017, supported by a normal monsoon, increased investment, and political stabilization.
• The recovery is expected to continue in line with potential growth thereafter.

2. Risks and Challenges

• Domestic risks dominate, including a fluid political environment and policy uncertainty due to upcoming elections.
• Fiscal pressures are increasing due to higher recurrent expenditures and slower revenue growth.
• External risks include reliance on remittances, which are expected to slow down due to declining oil prices and weaker demand from host countries.

Special Focus: Energy for Nepal

1. Current State of Nepal's Electricity Sector

• Power outages have increased over the past decade, becoming a major constraint for development.
• Electricity is critical for improving living standards, raising agricultural productivity, and transitioning youth from farming to non-farm employment.

2. Potential Electricity Sector Development

• Nepal has the potential to develop a reliable, affordable, and clean electricity sector.
• A green growth model could support poverty reduction and shared prosperity.
• An electricity export strategy through enhanced regional markets could provide revenue and economic diversification.

3. Investment Mobilization in Hydroelectricity

• Hydroelectricity is a key resource for Nepal, but investment mobilization remains a challenge.
• Public and private investment is needed to expand generation capacity and improve infrastructure.

4. Government Policy Response

• The government has taken steps to reform the electricity sector.
• Policy frameworks are being developed to support investment and improve efficiency.

5. Comprehensive Reform Program

• A comprehensive reform program is needed to modernize the electricity sector.
• This would include regulatory changes, investment incentives, and improved governance.

Key Information

• Data cutoff: September 15, 2016.
• Contributors: World Bank Macroeconomics and Fiscal Management team, including Damir Cosic, Roshan Bajracharya, Sudyumna Dahal, Saurav Rana, Shubham Chaudhuri, and Takuya Kamata.
• Special Focus contributors: Rabin Shrestha and Barsha Pandey.
• Media relations: Rajib Upadhya and Gayatri Sharma.
• Editing and publication: Sally Acharya and Sunita Kumari Yadav.

Summary

Nepal's economy is showing signs of recovery after a challenging year marked by the 2015 earthquake and trade disruptions. While global growth has weakened, South Asia has remained resilient, and Nepal's domestic demand has been a key driver. The external sector is supported by high remittances, which are a major part of the economy, but external risks remain due to the reliance on these flows. The monetary policy remains accommodative, with low interest rates and high liquidity. Credit growth has recovered, while deposit growth has moderated, leading to an increase in the credit-deposit ratio. Inflation has risen, eroding competitiveness, but this is temporary. The electricity sector is a critical area for reform, as it is essential for development, agricultural productivity, and economic diversification. A comprehensive reform program is needed to mobilize investment and improve the sector's performance.