Nepal's economy grows by 2.5 per cent during fiscal 2007

Jul 12, 2007, 4:51 GMT

Kathmandu - The Nepalese government Thursday said the country's economy expanded by a mere 2.5 per cent during the fiscal year that ended on July 17.

The growth rate is the lowest the Himalayan nation has registered in the last five years and was a result of sluggish growth of the industrial and agricultural sector.

In its economic survey for the fiscal year 2006-07, the government said agricultural and forestry sector which contributes more than 34 per cent to the national economy, grew by just 0.62 per cent.

The contributing factor for the poor growth in agriculture was the failure of Nepal's main crop paddy, due to poor monsoon rains last year.

The industrial sector, which grew by 2.16 per cent, reeled under labour unrest, sluggish investment and insecurity in the Nepal's restive southern plains.

'The sluggish growth in industrial sector has failed to create substantial new employment,' the survey said. 'Instead closure of largest exportable industries and withdrawal of foreign-funded companies left thousands of workers jobless in the manufacturing sector.'

The sluggish economic growth rate comes as a major shock for the coalition government that includes the Maoist former rebels.

The government had hoped the economy would expand by 4.5 per cent following the end of the conflict that had virtually paralysed the Nepalese economy.

However, new conflicts mainly in southern Nepalese plains where majority of the big industries are located, had discouraged new investment and closed several industries that were previously operating.

Added to that, shortage of power supply led to industries without electricity for several hours a day, slicing into productivity, the survey said.

The economic survey also said that despite rising numbers of Nepalese seeking working outside the country, the high numbers of unemployed remained a major concern.

However, some key social indicators had recorded positive growth including communication, education and health sectors, the government survey said.