Nepal's growth rate is likely to slow down to 4.6 per cent this year because of an unfavourable monsoon and political instability, an ADB forecast said today, asking the country to expedite the constitution-writing process to spur its economy.
Nepal government has revised the growth forecasts to 5 per cent, but the ADB report released here suggests the country is likely to miss the target owing to a delay in constitution writing and political instability.
The Manila-based Asian Development Bank (ADB) has asked Nepal to conclude the task of writing a new constitution at the earliest, adding that the country needs to maintain political stability to speed up its economic development.
"Concluding the protracted negotiations over the new constitution would strengthen the outlook," the Asian Development Outlook 2015 stated.
Political uncertainty, inadequate infrastructure, and other supply constraints are halting the country's productive business activity, it said.
There is no unanimity among political parties on how to proceed as many of the outstanding issues of the constitution including number, names and functions of proposed federal states as well as the overall structure of governance, said the report.
The political parties had set a January 22 deadline to draft a new constitution so as to institutionalise the achievements of the Peoples Movement of 2006. However, they have repeatedly failed to meet deadlines.
"The growth may rebound to 5.1 per cent in fiscal year 2016 assuming a stable political situation, a normal monsoon, a timely budget and its effective execution," the report said.
Although the growth is expected to lower next year due to unfavorable monsoon but it would revive in 2016, said ADB country director Ken Ichi Yokoyame while launching the report.
However, the ADB has stressed on the need to lower the country's dependency on agriculture and remittance if it is to attain a sustainable economic growth.
"Nepal can leave behind dependency on agriculture and remittance for an economy with a higher growth trajectory if it invests more in eliminating major deficiencies in infrastructure," the report said.
"Increase in production, more expenditure in capital goods and expanded expenditure in infrastructure are essential for attaining a robust economy," it said.
Nepal's GDP growth has accelerated to 5.2 per cent in fiscal year 2014 from 3.5 a year earlier, mainly due to favourable monsoon and marked increase in remittance, the report said.
