“How Covid-19 affecting Nepal’s economy” «

“How Covid-19 affecting Nepal’s economy”

Global Economic Slowdown triggered by Corona Virus Outbreak has done tremendous damage to the world economy. The economic impact of lockdown is starting to be felt and will escalate in the coming months. It is expected that nearly 200 million global full-time jobs will be lost in the next 3 months due to the pandemic. The worst affected sectors are Service (Hotel, Restaurants, Airlines, and Travel), Retail and Manufacturing. If we look at South Asia, millions of jobs are at risk after Covid-19 Lockdown. As factories shutdown, Industry labors are having a tough time to feed their families. However, Governments of few South Asian countries have promised to conduct a welfare program for their citizens.
In developing countries where the informal sector (untaxed vendor, laborer) makes up a significant portion of the economy, hit the hardest by the prolonged lockdown. According to the International Labour Organization (ILO) report, 40 crore informal sector workers in India are predicted to go poorer because of the shutdown. According to the reports by Reuters, more than two-thirds of Small Scale Manufacturers in India face problems paying salaries to their employees.
Also in Nepal, Wage earners, Informal Sector workers and self-employed vendors hit hard by shutdown. Ironically, this informal sector is going to miss out relief efforts conducted by government who support local economies and workers in registered business. In addition, Remittance to Nepal is projected to fall by 14% (equivalent to NRs. 145 Billion) this year, as per World Bank report. Remarkably, the size of remittance in Nepal was equivalent to 27.3% of GDP in 2019, the highest in South Asia. The economic slowdown is likely to affect directly remittance outflows from Middle East countries and other developed countries. Also, many Nepalese are expected to return home after losing their jobs due to global economic slowdown. According to the Foreign Employment Board, around 5,34,000 Nepalese workers from Gulf Countries and Malaysia want to return home immediately. It is going to be hard time for Nepalese people living in Nepal or outside the country.
Similarly Tourism which is a source of both direct and indirect employment has become the worst hit sector. It is being one of the largest industry which has contributed 8% to Nepal’s economy. However, it is expected to see millions rupees revenue loss and according to Hotel Association of Nepal, 1.1 million workers are at risk of losing jobs. In 2019, 1.17 million international tourists came into the country. This year, the government had a goal to attract two million tourists as the country was celebrating Visit Nepal Year 2020 but sadly there is no any room occupied. As hotels are going to close until October this year, this crisis is having adverse impact in country’s economy.
The Manufacturing and retail sector are also one of the largest contributors to the economy, which is already being affected by the drastic downfall in imports from China and India after the outbreak of the disease. Going forward there is also a high risk of general inflation. In the time of limited supply from China, Nepal may have to import raw material and finished products from third countries, which results in the products becoming more costly.
The country is suffering from this unprecedented crisis in many ways including a collapse in tourism, remittance, and retail business and will affect the nation for the whole year. Although we are yet to experience full impact of the Covid-19, this worldwide threat has already created economic uncertainty among all of us. In today’s scenario, as people are losing jobs and businesses are struggling to survive, the government needs to work proactively to solve this problem. A robust plan to support Nepalese business, concrete measures to fund small businesses, and relief packages for affected sectors will help the nation to revitalize its economy.
Bikram Thapa, Kathmandu Nepal