Economic growth projected at 3.5 pc in mid-year budget review

KATHMANDU: The government has projected the country's economic growth rate will be limited to 3.5% in the current fiscal year, according to the mid-year review of the budget, revising an earlier estimate that annual GDP growth would be 6%.

The mid-year review attributes the downgrade largely to a decrease in rice production, reduced cultivated area and productivity, a slowdown in the construction sector, and a decline in real‑estate and land transactions, among other factors.

Last fiscal year's total GDP growth rate is estimated to have been 4.6%. The mid-year evaluation report shows a preliminary estimate that GDP at basic prices increased by 3% in the first quarter of the current fiscal year, while the revised estimate indicates GDP at basic prices rose by 2.9% in the same quarter of the previous fiscal year.

The agricultural sector’s total value added is estimated to expand by 1.36% in the first quarter of the current fiscal year compared with the same period last year. The report notes an expected fall in rice production alongside increases in livestock, vegetable and fruit output, which together mean the growth rate of value added in agriculture is likely to remain relatively low.

Production of food crops such as maize, millet and buckwheat is expected to increase in the current fiscal year. In the previous fiscal year, production of food crops, including paddy, wheat and maize, is estimated to have risen by 2.67%, while cash‑crop production increased by 2.01%.

The industrial sector’s total value added is expected to increase by 5.44% in the first quarter of the current fiscal year compared with the same period last year, supported by expanded activity in the energy and construction sectors. Value added in production‑based industries is expected to grow by 1.52% in the first quarter, while the service sector’s value added is expected to increase by 3.03%, helped by expansion in wholesale and retail trade, financial intermediation, general administration and defence, tourism and personal services.

According to the mid‑year budget review, average inflation for the first six months of the current fiscal year is 1.7%; in the same period last year, inflation was 4.97%.