NEPAL ECONOMIC FORUM ISSUE 41 | JULY 2020 COVID-19 SPECIAL DOCKING NEPAL'S ECONOMIC ANALYSIS DOCKING NEPAL’S ECONOMIC ANALYSIS ISSUE 41 | JULY 2020 CONTENTS JULY 2020 | ISSUE 41 CONTENTS NEPAL FACTSHEET 4 EDITORIAL 5 1 GENERAL OVERVIEW 7 Political Overview 8 International Economy 13 2 MACROECONOMIC OVERVIEW 17 3 SECTORAL REVIEW 23 Agriculture 24 Energy 27 Infrastructure 30 Information and Communication Technology 34 Real Estate 37 Education 39 Health 42 Tourism 47 Trade and Debt 51 Foreign Aid 56 Remittance 60 4 MARKET REVIEW 66 Financial Market 67 Capital Market 72 5 ENDNOTES 75 6 NEF Profile 83 FACTSHEETNEPAL FACTSHEET KEY ECONOMIC INDICATORS GDP *** USD 29.04 billion GDP Growth rate (%)** 2.3% GNI (PPP) *** USD 3360 Inflation (y-o-y) ** 5.83% Gross Capital Formation (% 50.2% Agriculture sector (% share of GDP)*** 27% of GDP) *** HDI * 0.579 Manufacturing sector (% share of GDP)*** 15.2% Rank 147 Service sector (% share of GDP)*** 57.8% *HDI figure from Human Development Report of the UNDP-2019 ** Based on Nepal Rastra Bank's 10 month data of 2019/20 and Annual Report of 2018/19 *** Based on World Bank Data EDITORIAL Since the first case of COVID-19 was detected in Nepal in January 2020, like all the countries in the world, Nepal started to face the pandemic and Issue 41: July 2020 lockdown began on 23rd March 2020, as a necessity to keep pandemic Publisher: Nepal Economic Forum at bay but hit hard on the economy. We, at Nepal Economic Forum Website: www.nepaleconomicforum.org (NEF), in response to the pandemic decided to create a repository of P.O Box 7025, Krishna Galli, Lalitpur — data, information and analysis. In this regard, we produced daily updates, 3, Nepal weekly updates, monthly updates, voices from the ground (VFTG), expert Phone: +977 1 554-8400 speak (ES) and lessons from International Best Practices and continued Email: [email protected] active coverage of the pandemic in our social media platforms. Contributors: Anant Tamang In terms of national economy, since the outbreak of the coronavirus Ishan Bista pandemic and the series of lockdowns implemented to contain the Nasala Maharjan Priyanka Chaudhary virus, our nation has taken a severe hit on all fronts of the economy. The Raju Dhan Tuladhar economic growth target set by the government for the fiscal year 2019/20 Rojesh Bhakta Shrestha of 8.5 percent has been crushed by the pandemic as the Central Bureau Samita Shrestha of Statistics revised the growth to a mere 2.27 percent. However, NEF, in Samridhi Pant its recent study conducted in partnership with UNDP titled ‘Impact of Shraddha Ghimire Sudip Bhaju COVID-19 on Gandaki Province’ determined that due to the prolonged Tanushree Agrawal lockdown and disruptions in supply chain, the economic growth to be contracted by -0.6 percent. Design & Layout: Thuprai Solutions [email protected] Additionally, the reduction in the flow of remittances with a constricted tourism sector and a protracted trade deficit has further led to the depletion This issue of nefport takes into account of foreign currency reserves. The pandemic has also adversely impacted news updates from February 15 2020 the nation’s fiscal health, as the government revenue decreased while to May 15 2020. government expenditure increased owing to the expenditure incurred by The USD conversion rate for this issue the government to battle the crisis. Furthermore, thousands of foreign is NPR 117.34 to a dollar, the quarterly Nepali migrant workers have lost their jobs abroad owing to the crisis and average for this issue. will eventually return home. This will further stretch the labour market which is already battling high levels of unemployment. Also, the national Reproduction is authorised provided the source is acknowledged. budget for 2020/21 did not bring about major announcements that businesses and industries were expecting and no clear cut impetus to boost The views and opinions expressed in investments, growth and economy was visible. However, the monetary the article/publication are those of the policy released by the government aims to revive the COVID-19 impacted author(s) and do not necessarily reflect businesses by unveiling rescue packages, particularly targeting the energy, the official opinion of Nepal Economic Forum. Neither the organisation nor agriculture and SMEs which should assist to uplift the ailing economy. any person acting on their behalf may be held responsible for the use which may be made of the information con- Organizationally, NEF continued to participate in the Global Think Tank tained therein. Town Hall III event that involved in developing evidence based, action oriented policies and programs in response to the COVID-19 crisis. NEF Advisory Board: Additionally, we also collaborated with many regional and international Arnico Panday think tanks to provide Nepal perspective in the global platform. We have Kul Chandra Gautam Mahendra Krishna Shrestha been shared our perspectives with Observer Research Foundation (India), Shankar Sharma Carnegie India, National University Singapore, Center for International Private Enterprise, Council For Foreign Relations (US), and Brookings India. In the last quarter, we released a report titled ‘The World of Private School Cartels’ that highlighted the complex relationship between private schools and the government. Additionally, NEF has also partnered with CUTS International to explore existing as well as future connectivity initiatives in the BBIN sub-region in the Multi-modal Connectivity Project. The team of NEF, including all who volunteer from beed, deserves special mention and gratitude for keeping spirits high during these difficult times. As always, we look forward to receiving your valuable comments and suggestions. Sujeev Shakya Chair, Nepal Economic Forum NEFPORT ISSUE 41 – JULY 2020 7 GENERAL 1OVERVIEW 8 DOCKING NEPAL’S ECONOMIC ANALYSIS POLITICALPOLITICAL OVERVIEW This quarter has been a quagmire for Nepali politics. Additionally, the brunt of responding to COVID-19 has had profound effects in the political realm. The Government, which has been trying to respond to the crisis has received massive criticism for its inefficiency leading to the breakout of protests across the country. Moreover, the issuance of two ordinances by the government (which were eventually taken back) was seen by many as an attempt to consolidate power during a crisis. Nevertheless, the government was able to publish a new map of Nepal including the disputed territories of Limpiyadhura, Lipulekh and Kalapani, also amending the constitution to reflect the same, gaining nationwide support on the issue. Massive criticisms over government’s daily wage workers and the most subsequent increase in the number of lackluster handling of the COVID-19 vulnerable groups, and has prolonged cases. Most of these facilities are below pandemic: After the confirmation of rescuing migrants who have been the minimum required standards, and the second case of COVID-19 in the stuck abroad without jobs. Similarly, have become a hotspot for the virus country, the Government of Nepal the government has been mired and other diseases5. With the rapid (GoN) imposed a lockdown starting in controversies with the Ministry growth in the number of COVID-19 24 March to control the possible of health and population allegedly cases and an increase in the death spread of the disease1. With this, procuring medical equipment at toll, protests have erupted across the government plans such as 'Visit Nepal prices much higher than the prevailing country demanding a serious change 2020' were either put on hold or market price3. While the ministry in the government’s approach to cancelled2. However, the government refuted the allegations levelled against COVID-19. has been heavily criticized for its it, the government decided to bring mishandling of the crisis, as it was not in the Nepal Army to procure medical Nepal releases a new map with able to utilize the eighty plus days of equipment on a government-to- Limpiyadhura, Lipulekh and the lockdown to adequately plan and government modality4. Kalapani: On 8 May, Indian defense prepare for the impending crisis and minister Rajnath Singh inaugurated its socio-economic ramifications. Despite serious gaps and controversies a road between Dharchula and in its response to the crisis, the Lipulekh to Kailash Mansarovar in Despite repeated requests and government has been deflecting away Tibet via video conference -territories criticism from experts and various from critique while undermining which are claimed by Nepal near the sectors of the society, the government the graveness of the situation. Thus, Western border with India. This has been unable to adequately expand suggesting that the current leadership unilateral step resulted in an out testing, has prioritized the RDT is severely detached from the ground lash against India within Nepal. The tests – which are not recommended realities. Hospital beds, isolation GoN then released a new political by the WHO - over PCR tests, has wards and quarantine facilities set and administrative map by including failed to equip all health workers with up in an attempt to cope with the Limpiyadhura, Lipulekh and Kalapani must have medical gear such as PPEs, crisis have been overwhelmed with as territories of Nepal6. This new map has failed to address the concerns the influx of migrant workers from included areas which Nepal had been of everyday citizens including the abroad, mostly from India, and claiming to be its own, but was not NEFPORT ISSUE 41 – JULY 2020 9 Figure: 1 New map of Nepal with Limpiyadhura, Lipulekh and Kalapani Source: Department of Survey reflected in official maps. The cabinet territories. However, the ambassador behest, clearly referring to China10. approved the new map on 18 May, asserted India’s stance while handing Experts on Foreign Affairs from both which was followed by the unveiling over a letter from India’s Ministry countries have suggested that bilateral of the map by Padma Kumari Aryal of Foreign Affairs, denying it had dialogue is the only way to resolve -the Minister for Land Management, encroached any Nepali Territory.