The growth projection that the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) released on Thursday is higher than the government´s own growth forecast, which stands at 3.47 percent. GDP had grown by 4 percent and 3.5 percent in 2009 and 2010 respectively. [break]
The Economic and Social Survey of Asia and the Pacific states that economic revival in the country hinges in large part on the ability of the government to improve law and order, as Nepal´s poor security and political instability limit the government´s capacity to spend money and boost rural incomes.
Presenting the report, Posh Raj Pandey, executive chairman of South Asia Watch on Trade, Economics and Environment (SAWTEE), cited high inflation, labor unrest, power shortage and rising food prices as major obstacles to economic growth.
"Containing high inflation, encouraging domestic consumption and improving economic infrastructure and ending the problems of electricity are the major challenges facing the country," said Pandey.
The report states that countries in Asia and the Pacific are witnessing faster recovery from the global financial crisis compared to countries in other regions. However, they are facing rising inflationary pressures, especially with the return of the food and fuel crisis. "Many of the export-driven countries in Asia and Pacific are going to suffer knock-on effects of sluggish growth in some developed countries," reads the report.
The UNESCAP report has also estimated a one percentage point drop in economic growth in Japan, recently struck by earthquake and tsunami. The report says Asia-Pacific developing economies will grow in 2011 at 7.3 percent -- 1.5 times higher than countries in other regions.
Given the spiraling price of food and oil in a sustained and synchronized way, the report expects the oil price rise to drag down growth by up to one percentage point in some developing economies, besides putting pressure on inflation and adversely affecting current accounts.
The report has stressed the need to increase productive capacity in order for least developed countries to benefit from greater connectivity and regional integration.
Releasing the report, Dr Yuba Raj Khatiwada, governor of Nepal Rastra Bank, stressed the need to boost domestic consumption to increase domestic demand and to strengthen supply-side through agricultural production and infrastructure development and by benefiting from the international trade regime.
Robert Piper, UN Humanitarian Coordinator in Nepal, also highlighted the impact of ballooning energy and food prices in the Asia-Pacific region.
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