Nepal´s GDP decelerated to 2.5 percent

Despite being optimistic in Tenth plan, Nepal´s Real Gross Domestic (GDP) product has declined in the fiscal year of 2006/7 compared to the previous year. As per the preliminary estimates of Central Bureau of Statistics, the growth of GDP decelerated to 2.5 percent at producer´s price in 2006/07 compared to a growth of 2.8 percent in 2005/06, said Ministry of Finance (MoF).

According to the current macroeconomic situation based on annual data of 2006/07, agriculture and non-agriculture production was estimated to grow by 0.7 percent and 3.6 percent respectively in the review year. The respective growths were 1.1 percent and 4.6 percent in 2005/06. The statistics of the MoF, shows that of the source of GDP, services sector increased by 4.1 percent on the back of growth of the real estate, rent and commercial services sector and financial intermediation sector by 8.6 percent. Similarly, transportation, storage and communication sector witnessed a growth of 8.1 percent while education sector scaled by 5.6 percent.

"Mining and quarrying sector and electricity, gas and water sector which increased by 6.0 percent and 3.2 percent respectively contributed to the growth industrial sector at a low level of 2.2 percent. Last year services and industries sector had increased by 4.7 percent and 4.3 percent respectively." the report says.

During the period, food grains production saw a decline as there was significant decrease in the production of paddy which is the major food grains of the country. The paddy production was heavily decreased due the insufficient rainfall at the time of paddy plantation. Similarly, the production of cash crops of potato and oil seeds also slipped.

The fiscal year 2006/07 which was the final year of the Tenth Plan had set an optimistic economic growth target of 6.2 percent and the normal growth target of 4.3 percent. However the actual average growth remained at 3.4 percent, a far less than the targeted normal growth rate during the Plan period.

The lower than expected economic growth was on account of less than satisfactory peace and security situation in the country, lower growth of private sector investment, hindrance in supply of goods due to strikes, a low level of capital expenditure by the GON and an adverse weather condition