The World Bank has forecasted that Nepal’s GDP will slump to 1.8 percent in 2020 amid the Covid-19 pandemic. In its 2020 Global Economic Prospects, the Washington DC-based international agency said that the Himalayan nation will move towards a gradual recovery in the next year. The report estimates that Nepal’s GDP growth will be 2.1 percent in 2021. According to the report, the macroeconomic climate for South Asian countries will remain adverse in 2020 as the recovery in industrial production is reversed by Covid-19 related disruptions such as mitigation measures, global exports plunge and fall in remittances. “In Nepal, growth is projected to decline to 1.8 percent due to largely the same factors, in addition to a drop in tourism,” reads the report.
Similarly, Nepal will also be impacted by economic slump in India. “Economies like Nepal are also vulnerable to sharper-than expected deceleration in India, an important intraregional trade partner,” said the bank. Besides, Nepal’s economy also remains vulnerable to supply chain disruptions, domestic as well as international stemming from imports of intermediate goods, and travel-related disruptions to international contractors in sectors like construction, according to the report. However, the World Bank hopes that the situation for Nepal will improve in 2021 and the recovery from the Covid-19 pandemic will be aided by increased private sector investment due to continued reforms to improve business environments.
According to the report, the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. The bank forecasts that the global economy will shrink by 5.2 percent this year. “That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870,” said the bank.
Economic activity among advanced economies is anticipated to shrink 7 percent in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. “Emerging market and developing economies (EMDEs) are expected to shrink by 2.5 percent this year, their first contraction as a group in at least 60 years. Per capita incomes are expected to decline by 3.6 percent, which will tip millions of people into extreme poverty this year,” reads the report.
According to the bank, the blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” a statement quoted World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu as saying. “Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”
The report forecasts contraction of 6.1 percent for US economy this year, reflecting the disruptions associated with pandemic-control measures. Euro Area output is expected to shrink 9.1 percent in 2020 as widespread outbreaks took a heavy toll on activity. Japan’s economy is anticipated to shrink 6.1 percent as preventive measures have slowed economic activity.
"The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades," the statement quoted World Bank Prospects Group Director Ayhan Kose as saying. “The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”
According to the report, economic activity in the South Asia region is projected to contract by 2.7 percent in 2020 as pandemic mitigation measures hinder consumption and services activity and as uncertainty about the course of the pandemic slows down private investment. “Industrial and services activities have plummeted in South Asia as a result of pandemic mitigation measures and the collapse in global demand. Trade activity has sharply fallen. Consumption has been severely hindered as nationwide lockdowns were instituted in several economies, despite some recent relaxations. Tourism has become severely constrained by the pandemic, which has led to sharp declines in arrivals in economies such as Bhutan, Nepal, Sri Lanka, and especially Maldives, where tourism accounts for a large share of output,” said the bank.