nepal macroeconomic update, february 2015
DESCRIPTION
Nepal Macroeconomic Update, February 2015, Vol.3, No.1TRANSCRIPT
-
Macroeconomic Update February 2015
Chandan Sapkota
Asian Development Bank
Nepal Resident Mission
Press briefing, 27 February 2015
The views expressed in this document are those of the author and do not necessarily reflect the views and policies of the Asian Development Bank, or its Board of Governors, or the governments they represent.
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Macroeconomic Update
Mid-year Overview
Real Sector
Fiscal Sector
Monetary Sector
External Sector
Issue Focus: Quarterly National Accounts of Nepal
Presentation Outline
-
Macroeconomic Update
-
Mid-year FY2015 Overview 1
Late and subnormal monsoon
Political uncertainty
Reported deceleration of remittance inflows
Large gap between investment commitment &
actual inflows
Real sector scenario
Budget utilization lower than mid-year FY2014
12.6% capital budget utilization rate, lower
than last years 13.5%
High bunching of capital spending expected
Robust revenue performance
Increasing budget surplus
Fiscal sector scenario
-
Mid-year FY2015 Overview 2
Moderating food prices but still at high level
Lower fuel prices lowering pressures on
overall inflation
Lower deposit growth and higher credit growth
Negative real deposit interest rate
Lower excess liquidity
Volatile short-term interest rates
External sector scenario
Merchandise exports dropped by 1.4%
Oil import bill decreased
Non-oil import bill increased
Overall merchandise imports increased
Recorded workers remittance inflows
decelerated, despite increase in migrant
workers
Current account and balance of payments
surplus dropped
Monetary sector scenario
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Real Sector
4.3 3.8
4.6
3.5
5.2
0
1
2
3
4
5
6
FY2010 FY2011 FY2012 FY2013R FY2014P
Contributions to GDP growth (percentage points)
Agriculture Manufacturing
Construction Other industry
Wholesale and retail trade Real estate renting and business activities
Other services GDP growth (basic prices)
8.8
7.5
7.1
6.0
5.7
5.5
4.9
4.8
4.7
4.7
3.7
3.0
2.9
1.9
1.8
0 2 4 6 8 10
Wholesale and retail trade
Transport, storage and
Hotels and restaurants
Education
Public administration and defence
Health and social work
Fishing
Electricty, gas and water
Agriculture and forestry
Community, social and personal
Mining and quarrying
Real estate, renting and business
Construction
Manufacturing
Financial intermediation
Sub-sectoral growth (% change)
39
90 84
120
254
38
183
65
0
50
100
150
200
250
300
FY2010 FY2011 FY2012 FY2013 FY2014 Mid-yearFY2013
Mid-yearFY2014
Mid-yearFY2015
Domestic capital investment commitment (NRs
billion)
Energy Manufacturing Service
Tourism Agriculture Mineral
Total
20.1
9.7
14.6
39.4
0
5
10
15
20
25
30
35
40
45
FY2011 FY2012 FY2013 FY2014 Mid-yearFY2013
Mid-yearFY2014
Mid-yearFY2015
FDI commitment and actual inflows (NRs billion)
Service EnergyManufacturing TourismAgriculture MineralTotal FDI commitment Actual FDI inflows
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FY2015 Growth Outlook
4.6
3.5
5.2
4.0
5.0
0
1
2
3
4
5
6
FY2012 FY2013R FY2014P FY2015f_s1 FY2015f_s2
NRM forecast as of Feb 2015
Agriculture Industry Services GDP growth (basic prices)
GDP growth estimated between 4.0% and
5.0% for FY2015
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Fiscal Sector
156.1
130.1
11.5 14.5
161.9
123.5
14.7 23.7
-20
20
60
100
140
180
Total Recurrent Capital Financing
Mid-year expenditure (NRs billion)
Mid-year FY2014 Mid-year FY2015
30.2
36.8
13.5
18.5
26.2
30.9
12.6
23.2
0
5
10
15
20
25
30
35
40
Total Recurrent Capital Financing
Mid-year budget utilization (% of total allocation)
Mid-year FY2014 Mid-year FY2015
3.3
5.4
4.3 4.0
0
1
2
3
4
5
6
FY2011 FY2012 FY2013R FY2014P FY2015BE FY2015f
Capital expenditure (% of GDP) Assuming 80% and 75% capital budget
utilization,
0
50
100
150
200
250
300
350
400
450
Customs VAT Excise Income Total taxRevenue
Totalrevenue
FY2014 revenue target and mid-year mobilization (NRs billion)
Mid-year FY2015 actual FY2015 target
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Need for Higher Capital Investment
Suppressed economic growth requires a boost to aggregate demand
Initially, private investment continent upon public capital investment
Higher quantity and quality of capital investment Boosts economic performance by accelerating recovery & establishing more
sustainable growth patterns Generates aggregate demand quickly Enhances productivity growth Encourages technological innovation Spurs private-sector investment by increasing returns
Higher quantity: Close the infrastructure deficit Higher quality: Productivity-enhancing investment (infrastructure +
human capital)
Monetary policy: Relatively less effective Fiscal policy: More effective; transmission mechanism direct and less
lags; Stabilization measures (short-term) & structural changes (long-term)
(Michael Spence. 20 Feb 2014. Why Public Investment?. Project Syndicate)
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Monetary Sector 1
0
2
4
6
8
10
12
14 Y-o-Y inflation
FY2013 FY2014 FY2015
0
2
4
6
8
10
12
14
16 Y-o-Y food inflation
FY2013 FY2014 FY2015
0
2
4
6
8
10
12
14Y-o-Y non-food inflation
FY2013 FY2014 FY2015
9.6 9.6
8.3
9.9 9.1
7.0
8.0
0
2
4
6
8
10
12
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015f_s1 FY2015f_s2
NRM forecast as of Feb 2015
Contribution to Inflation (percentage points)
Food and beverage Non-food and services Nepal-CPI
Inflation estimated between 7.0% and
8.0% for FY2015
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Monetary Sector 2
-10
0
10
20
30
40
FY2014 Mid-yearFY2014
Mid-yearFY2015
Growth of deposits (% change)
Commerical banks Development banks
Finance companies Total deposit
0
10
20
30
FY2014 Mid-yearFY2014
Mid-yearFY2015
Growth of credit (% change)
Commerical banks Development banks
Finance companies Total credit
-15
-10
-5
0
5
10
15
20
25
30
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Mid-yearFY2014
Mid-yearFY2015
Change in lending to construction and real estate (NRs billion)
Construction Real estate
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Monetary Sector 3
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
Interbank rate 91-day treasury bills rate
Interbank and 91-day Treasury bill rate (%)
FY2015 FY2014
0
2
4
6
8
10
12
14
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
Weighted average rates of commercial banks
FY2015 Deposit FY2015 Lending
0
200
400
600
800
1000
1200
FY2012 FY2013 FY2014 Mid-yearFY2014
Mid-yearFY2015
Mid-year stock market performance
NEPSE index (closing) Market capitalization (NRs. billion)
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External Sector
0
1
2
3
4
5
6
0
100
200
300
400
500
600
FY2010 FY2011 FY2012 FY2013 FY2014 Mid-yearFY2014
Mid-yearFY2015
Re
mit
tan
ce i
nfl
ow
s ($
bil
lio
n)
Nu
mb
er
of
mig
ran
t w
ork
ers
(000)
Labor migration and remittance inflows
Number of migrants workers Workers' remittances
6065707580859095
100105110
1-J
an-1
11
1-M
ar-1
11
9-M
ay-1
12
7-J
ul-
11
4-O
ct-1
11
2-D
ec-1
11
9-F
eb-1
22
8-A
pr-
12
6-J
ul-
12
13
-Sep
-12
21
-No
v-1
22
9-J
an-1
38
-Ap
r-1
31
6-J
un
-13
23
-Au
g-1
33
1-O
ct-1
38
-Jan
-14
18
-Mar
-14
26
-May
-14
3-A
ug-
14
11
-Oct
-14
19
-Dec
-14
Daily nominal exchange rate (NRs per $) Growth rate of workers' remittances dropped to
5.0% from 17.9% in
mid-Jan 2015. But, the
number of migrant
workers increased by
20.4%, up from 12.5%
over the same period.
-8
-6
-4
-2
0
2
4
6
8
Export (fob) Import (cif) Merchandisetrade
balance
Servicesbalance
Incomebalance
Transferbalance
Currentaccountbalance
Capitalaccountbalance
Financialaccountbalance
Balance ofpayments
Oil import Workers'remittances
Balance of payments ($ billion)
FY2014 Mid-year FY2014 Mid-year FY2015
Oil import bill decreased
by 4.6%
Growth rate of workers' remittances
dropped to 5.0% from 17.9% in mid-
Jan 2014 Current account surplus
dropped to $139.1 million Exports growth dropped marginally by
1.4%
Merchandise trade deficit further widened
despite lower oil import bill
Imports increased despite a fall in oil import bill
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Issue Focus: Quarterly National Accounts of Nepal
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Quarterly National Accounts 1
-20
-15
-10
-5
0
5
10
15
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY2011 FY2012 FY2013 FY2014
Growth rate of seasonally adjusted and seasonally unadjusted QGDP
Seasonally adjusted Seasonally unadjusted
Short-term fluctuation monitoring and analysis Timelier picture of the economy Essential for immediate corrective policy actions
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Quarterly National Accounts 2
ADB assisted CBS in Quarterization of past GDP data series Benchmarking Seasonality analysis
CBS published QGDP compilation methodology and QGDP of key
sectors for the first time in 2012.
QGDP should be Timely Coherent Accurate Comprehensive Reasonably detailed
Available QGDP data: Q1FY2011 to Q2FY2014
Publication of QGDP data should be continued to facilitate better policy
analysis, dialogues and decision making.
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