Nepal’s growth prospects in 2012

According to the latest Global Economic Prospects 2011,in 2012, Nepal is expected to have a nominal GDP of US$ 21.6 billion (2005 current prices), population of 31 million, GDP per capita of US$ 697.3, and real per capita GDP growth of 2.1%. Here is an earlier blog post about GEP 2011.

Real GDP growth is expected to be 3.7% and 4% in 2011 and 2012. Exports growth will initially decline to 5.6% and then rise to 7.3% in 2012. Meanwhile, imports growth will decline to 6.3% and then increase to 6.9% in 2012.

Private consumption is expected to contribute 3.3% to GDP growth in 2012, but government consumption is expected to contribute just 0.6%. Fixed investment and net exports are expected to contribute 1.2% of GDP growth and 1.3% of GDP growth in 2012.

As a share of GDP, private consumption is expected to be 75.3% and 74.4% in 2011 and 2012, respectively. Similarly, government consumption as a share of GDP is expected to be 11.1% in 2012; fixed investment 20.6%; change in stocks 7.2%; and total investment 27.9%.

Both exports and imports (as a share of GDP) are expected to decline in 2012. Exports are expected to be 11% of GDP and 9.9% of GDP in 2011 and 2012, respectively. The figures for imports for the same period are 26.1% and 23.7%. It means that trade deficit is expected to increase further. Exchange rate is expected to appreciate, probably due to weak dollar.

Nepali Macroeconomic Forecasts, 2008-2012
Indicator	2008	2009	2010	2011	2012
Real Expenditure Growth
GDP at market prices	5.3	4.7	3.3	3.7	4
Private consumption	4.9	4.5	3.8	4	4.1
Government consumption	6.8	19.3	5.5	5.8	6
Fixed investment	6	5.9	4	5	5.5
Exports, GNFS	-3.4	38.4	6.4	5.6	7.3
Imports, GNFS	7.5	20.2	6.8	6.3	6.9
Contribution to GDP Growth
Private consumption	3.9	3.6	3	3.2	3.3
Government consumption	0.6	1.7	0.6	0.6	0.6
Fixed investment	1.3	1.3	0.9	1.1	1.2
Net exports	-0.5	4.8	1	0.9	1.3
Price Deflators
GDP at market prices	-6.7	8.2	18.7	25.1	3.3
Private consumption	-8.9	11.3	14.5	22.2	2
Exports, GNFS	-5.8	6.4	-5	4	-9.4
Imports, GNFS	-4.6	7.9	-5.4	3.5	-8.9
Share of GDP
Private consumption	77.1	79.2	76.8	75.3	74.4
Government consumption	10	11.1	11.1	11	11.1
Fixed investment	21.1	21.2	20.8	20.6	20.6
Change in stocks	12.1	8.4	7.9	7.4	7.2
Total investment	33.2	29.6	28.7	28	27.9
Exports, GNFS	12.1	15.7	12.9	11	9.9
Imports, GNFS	32.7	37.4	30.8	26.1	23.7
Overall
Nominal GDP (USD billions)	11.2	12.6	15.5	20.1	21.6
Population (millions)	28.8	29.3	29.9	30.4	31
GDP per capita, current USD	388.1	431.1	518.9	661.1	697.3
Real per capita GDP growth	3.3	2.7	1.4	1.8	2.1
USD Fx rate	73.3	76	73.6	65	67.6

Source: Global Economic Prospects 2011; 2011 and 2012 are forecasts

Developing countries leading global recovery

According to the latest Global Economic Prospects 2011, global GDP (measured at 2005 market prices and exchange rates), which expanded by 3.9% in 2010, will slow to 3.3% in 2011, before it reaches 3.6% in 2012. Developing countries are expected to grow 7% in 2010, 6% in 2011 and 6.1% in 2012. They will continue to outstrip growth in high-income countries, which is projected at 2.8% in 2010, 2.4% in 2011 and 2.7% in 2012. The report notes that strong developing country domestic demand is leading the world economy but persistent financial sector problems in some high-income countries might threaten growth.

It notes that foreign direct investment (FDI) to developing countries  rose a more modest  16% in 2010, reaching  $410 billion after falling 40% in 2009. An important part of the rebound is due to rising South-South investments, particularly originating in Asia.

In many economies, dollar depreciation, improved local conditions, and rising prices for goods and services means that the real price of food has not risen as much as the U.S. dollar price of internationally traded food commodities. But, the report cautions that double-digit price increases of key staples in the past few months are pressuring households in  countries with an already-existing high burden of poverty and malnutrition. And, if global food prices rise further along with other key commodities, a repeat of the conditions in 2008 cannot be excluded.

The main short-term risks to the global economy include:

• the possibility of further market turmoil and contagion in Euro area sovereign debt markets;
• the possibility that very low interest rates in high-income countries induce a second boom-bust cycle among one or more developing countries; and
• the possibility that rising commodity prices threaten the recovery and or poverty reduction in developing countries.

About South Asia’s growth prospects, the report notes:

“The South Asia region is projected to post GDP growth of 7.9% on average over the 2011-2012 fiscal years, buoyed by vibrant growth in India. This compares with estimated growth of 8.7% in fiscal year 2010. The region benefited from aggressive demand stimulus measures, a revival in investor and consumer sentiment, and a resumption of capital inflows. A recent move toward tighter policy will likely need to be pursued further, given the region‟s high fiscal deficits (the largest among developing regions), high inflation and deteriorating current accounts.”

South Asia’s real GDP growth accelerated to an estimated 8.7 percent in FY2010-11 from 7.0 percent in FY2009-10, buoyed by very strong growth in India, which represents 80 percent of regional GDP. Excluding India, regional GDP growth (on a fiscal year basis) firmed, but to a more modest 5.1 percent from 4.3 percent the year before. On a calendar year basis, GDP for the region as a whole is estimated to have expanded 8.4 percent in 2010 after 5.3 percent in 2009, and to 4.8 percent in 2010 from 3.8 percent in 2009 if India is excluded.

In 2012, India, Pakistan and Bangladesh are  expected to grow at 8.7%, 3.8%, and 6.3%, respectively. Nepal is expected to grow at 4% in 2012.

Forecast summary, 2010-2012
Indicator	2010	2011	2012
South Asia
Real GDP	8.7	7.7	8.1
Real GDP (PPP)	8.7	7.7	8.1
Exports	7.4	8.8	10.3
Imports	6.2	9.4	10.3
Current account (%GDP)	-3.4	-2.9	-2.9
Developing Countries
Real GDP	7	6	6.1
Real GDP (PPP)	7.1	6.2	6.4
Exports	19.9	9.1	10.6
Imports	22	9.3	10
Current account (%GDP)	1.3	1	0.9
Nepal
Real GDP	3.3	3.7	4
Exports	6.4	5.6	7.3
Imports	6.8	6.3	6.9
Annual percentage change, unless indicated otherwise; 2011 and 2012 are estimates; table sourced on 2011-01-14