The Great Economic Shift: From Global Shocks to Nepal’s New Reality
The last few years have felt like an endurance test for the global economy. Between a once-in-a-century pandemic, geopolitical tensions, and skyrocketing supply chain costs, the "old" economic rules were rewritten. For a landlocked nation like Nepal, these global ripples often feel like tidal waves by the time they reach our borders.
By analyzing the data from the
recent Economic Survey alongside global trends, we can see a clear
picture of how we survived the storm and where our "new normal" is
headed.
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1.
The Global Seesaw: A World in Recovery
The world economy didn’t just slow
down in 2020; it experienced a visceral shock, contracting by -2.7%. While
2021 saw a massive, artificial "rebound" of 6.5% as the world
reopened, that momentum was unsustainable.
By 2023, global growth stabilized at
around 3.2%. However, not all economies are created equal:
- Developed Economies:
These nations have struggled with stagnation, growing at a modest 1.6%
in 2023.
- Emerging and Developing Asia: This is where the heartbeat of global growth lies,
consistently maintaining a stronger pace of 5.6% in 2023.
For Nepal, being situated in the
most energetic economic neighborhood in the world is both a challenge and a
massive opportunity.
2.
South Asian Context: Comparing Neighbors
To understand Nepal’s performance,
we must look at our peers in the SAARC region and China.
- Nepal’s Resilience:
After a painful -2.4% dip in 2020, Nepal recovered to a 5.8%
growth rate in 2022. The projected 4.4% for 2023 was a sign of the
economy cooling down to a more sustainable, albeit slower, pace.
- The Indian Engine:
India continues to be a regional powerhouse, maintaining a 5.9%
growth rate into 2023.
- The Struggles of Sri Lanka: Perhaps the most sobering data comes from Sri Lanka,
which saw its economy shrink by -8.0% in 2022 and another -3.0%
in 2023. This serves as a reminder of how quickly fiscal instability can
impact a nation.
- The Maldives' Volatility: Tourism-dependent Maldives showed the most extreme
swings, dropping a staggering -33.4% in 2020 before a massive 41.7%
recovery in 2021.
3.
The Price We Pay: The Inflation Story
Inflation—the "hidden
tax"—has been the primary concern for Nepalese households. In 2021,
Nepal’s inflation was a manageable 3.6%. However, global pressures
pushed that to 6.3% in 2022 and a projected 7.8% by 2023.
While 7.8% feels high when
buying groceries, a look at our neighbors shows how much worse it could have
been:
- Sri Lanka
saw consumer prices explode by 46.4% in 2022.
- Pakistan
reached 27.1% inflation by 2023.
- China,
conversely, maintained an incredibly low inflation rate of just 2.0%.
Nepal’s ability to keep inflation in
the single digits during a global crisis is largely due to our tight monetary
ties and trade with India, which also kept its inflation relatively stable at 4.9%
in 2023.
4.
Nepal’s Internal Engine: A Sectoral Breakdown
The structure of our economy is
undergoing a permanent transformation. We are no longer the purely agrarian
society of 30 years ago.
The
Dominance of Services (Tertiary Sector)
The Tertiary Sector—which
includes tourism, banking, and trade—now accounts for a massive 62.4% of
our GDP. This is where the modern Nepalese worker lives.
- Wholesale and Retail Trade is a major driver, contributing 15.39%.
- Real Estate Activities remain a significant chunk at 8.37%.
- Financial and Insurance Activities have grown steadily to 7.37%.
The
Shrinking Share of Agriculture (Primary Sector)
The Primary Sector
(Agriculture, Forestry, and Fishing) now makes up 24.6% of the GDP. While
its percentage share of the economy is decreasing (down from 30.9%
a decade ago), it is important to note that the actual value of
agricultural production is still increasing. We are simply growing faster in
other areas.
The
Industrial Gap (Secondary Sector)
The Secondary Sector
(Manufacturing, Construction, and Electricity) accounts for 12.9% of the
GDP.
- Construction
makes up 5.52%.
- Manufacturing
stands at 5.32%.
- Electricity and Gas
is a small but rapidly growing bright spot, now at 1.64%.
5.
Tracking Personal Wealth: Per Capita Income
The most "human" way to
look at these numbers is through Per Capita Income—the average share of
the economic pie per person.
In the last decade, the growth in
nominal terms has been significant:
- Fiscal Year 2070/71:
The average GDP per capita was NRs. 80,941.
- Fiscal Year 2079/80:
It climbed to NRs. 182,683.
When converted to US Dollars, the Nominal
Per Capita GNI (Gross National Income) stands at $1,410. While this
indicates progress, the Real Per Capita GNI growth rate (which accounts
for inflation) actually dipped by -0.77% in the projected 2079/80 period.
This means that while we are earning more "paper money," our actual
purchasing power has hit a temporary plateau.
6.
The Road to 2082/83: What Lies Ahead?
As we stand in the middle of
2082/83, the data from 2079/80 shows us the "why" behind our current
situation. The high consumption rates (over 93% of our GDP goes to
consumption) mean we are not saving or investing enough domestically. Our Gross
Domestic Saving is low, at only 6.41%.
Key Takeaways for our Readers:
1.
Service-Led
Growth: Our future is in services and
digital transformation, but we must not neglect the industrial base.
2.
Inflation
Awareness: We are vulnerable to external price
shocks. Diversifying our energy sources (like moving toward the 1.64%
and growing electricity sector) is vital for stability.
3.
The
Investment Gap: To move from a "developing"
to a "middle-income" nation, we need to shift from being a nation of
consumers to a nation of savers and producers.
Understanding these numbers isn't
just for economists—it's for every student, entrepreneur, and citizen trying to
navigate the Nepalese market.
What do you think? Has your personal "per capita income" kept up with these national averages? Share your thoughts in the comments below!
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