WB projects Nepal’s economy to grow by 0.6 pc, poverty to worsen

KATHMANDU: The World Bank (WB) has released a report on Thursday claiming that poverty will further worsen in Nepal in 2021.

According to the report, the coronavirus pandemic continues to wreak havoc in South Asia including Nepal so far this year.

As a result, workers in the informal sector have been hit the hardest and millions of South Asians are being pushed into extreme poverty.

“In Nepal, the impact of the coronavirus is most likely to be felt by informal workers or people not covered by social security and assistance, and they are likely to be pushed into extreme poverty,” said Faris H. Hadad-Zervos, World Bank National Director for the Maldives, Nepal and Sri Lanka.

According to him, there is a need to bring quality programs to help people working in the informal sector with income, social security, and employment.

In Nepal, about 50 percent of the informal businesses are enterprises and these enterprises are the main source of income for most workers. Of these groups, urban informal sector workers and urban self-employed families are most at risk.

The report urges the government to develop policies that support universal social security as well as greater productivity, skills development and human capital.

Similarly, the report has estimated that Nepal’s economic growth will stand at 0.6 percent.

According to the latest South Asia Level Economic Report, the downturn caused by the COVID-19 has hampered economic activity, especially in the tourism sector, which is projected to grow by only 0.2 percent in 2020 and 0.6 percent in 2021.

South Asia’s economic contraction, which has averaged 6 percent annually for the past five years, is projected to shrink by 7.7 percent by 2020.

The report predicts a much faster-than-expected economic downturn across South Asia.

Regional growth is projected at 4.5 percent in 2021. Looking at the rate of population growth, the per capita income of this sector will be 6 percent less than estimated in 2019. This indicates that the current economic growth will not offset the permanent economic damage caused by the current epidemic.

In previous recessions, declining investment and exports had led to a decline. But this time the recession is different because private consumption, traditionally the backbone of demand in South Asia and the main indicator of economic well-being, will fall by 10 percent, leading to an increase in poverty, the report adds.

 The decline in remittances has also led to the rapid loss of income to the poorest in some countries.