16 April 20202, NIICE Commentary 4120
Ayushi Goyal
The corona virus, also known as COVID-19, has global impact. As per the World Health Organization (WTO), by 16 April, the number of confirmed cases globally was 1,954,724 with 126,140 death. Fortunately, by the same day, Nepal had 16 confirmed cases without any death. In spite of relatively low number of cases, Nepalese economy will still be deeply affected by this pandemic.
As prescribed by the WHO, the important and necessary steps like social distancing are imposed by the government of Nepal, like the rest of the world, since 23 March, putting a pause on economic activities. The economy of Nepal is shrinking as retail, manufacturing, tourism, hospitality, agricultural, banking, service sector and others are affected in Nepal. According to Asian Development Bank, the spread of this virus will hit almost every sector of the Nepalese economy, shaving up to 0.13 percent off the Gross Domestic Product (GDP) and rendering up to 15,880 people jobless.
Impact on Nepalese Economy
Due to the lockdown, the fate of mega infrastructural projects is also uncertain. The completion date of some of the mega projects such as Pokhara International Airport, Kathmandu-Narayangarh Road Widening, expansion of the Kathmandu Ring Road, Melamchi Drinking Water Projects are postponed. Most of these projects are being constructed by Chinese company. The deadline for the Gautam Buddha International Airport in Bhairahawa, which is also being constructed by Chinese company, has been pushed to mid-May from March 31. One is still doubtful that the project would be completed by mid-May.
Remittance is a major source of GDP in Nepal. As majority of the countries are under lockdown to contain the spread of virus, this sector will be badly hit. In past two months, remittance has contributed mere 1 percent to the economy. It is also predicted that there will be job cuts around the world which will have catastrophic side effect. Similarly, according to the Central Bureau of Statistics, wholesale and retail sector is the second largest contributor to the economy, after agriculture, which contributes 1.37 percent to the economy. It has also been affected due to fall of imports from China. Moreover, Nepal’s pharmaceutical industry is also heavily hit as it is dependent on China for the chemicals used in making medicines. Likewise, the packaging industry also relies on China for raw materials. The trade between Nepal and China is limited for the time being, or, has almost become non-existential, in certain areas. In this situation, Nepal may have to import goods from other countries which will cause price-hike. The reason why Nepal is so deeply affected by the COVID-19 is its dependence on China, as it is Nepal’s second largest trading partner after India. Nepal has bigger fear as both its neighbours, and major trading partner, India and China had severe lockdown.
Nepal had declared 2020 as the Visit Nepal Year with the aim of attracting two million foreign tourists. The figure was double than the previous year. Unfortunately, Nepal had to called off as the pandemic began to spread and air travels around the world was being suspended. The budget allocated for Visit Nepal 2020 by the Ministry of Tourism was NPR 105 million to cover various secretariat and operational expenses for the campaign. The already spend amount spent is also huge and it cannot be recovered. It not only shattered the reviving tourism industry, but occurred huge economic loss to Nepal due to the cancellation of various events. Most ambitious event ‘Sagarmatha Sambad 2020’ of the government of Nepal also got cancelled. Civil Aviation, Banking, hospitality and many other sectors are going to suffer huge loss. Moreover, it is the psychological fear in people’s mind that will cause lasting impact on the economy.
The government should provide relief packages to the under privileged and the needy. It should also come with the effective plans to protect the economy from collapsing. It has been reported that very few tests are being conducted daily due to lack of enough testing kits. The government should speed up the process so that it can isolate the affected for treatment, and normalize the economic activities at the earliest.
