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Analysis of Nepal's Economic Condition: Key Indicators

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NEPSE trading

Analysis of Nepal's Economic Condition: Key Indicators

The recent fluctuations in Nepal's economic growth and stability have been reflected through various economic indicators over the years. Data from fiscal years 2019/20 to 2023/24 reveal some recovery from the pandemic’s impact, though certain challenges remain.

Fluctuations in Real GDP:

  • In 2019/20, the real GDP growth rate dropped to -2.4% due to the COVID-19 pandemic.

  • It showed signs of recovery with a growth rate of 4.5% in 2020/21 and 5.3% in 2021/22.

  • However, the growth rate fell again to 2.3% in 2022/23, and remained at a limited 3.5% in 2023/24, highlighting the need for further economic improvements.

GDP Decline:

  • The GDP had a high growth of 14.3% in 2021/22, but this fell to 7.5% in 2022/23 and 6.7% in 2023/24.

  • This decline can be attributed to inflation and instability in foreign markets, indicating added challenges for the Nepali economy.

Decline in Capital Formation:

  • The gross fixed capital formation ratio fell from 30.5% in 2019/20 to 24.5% in 2023/24.

  • This decrease indicates reduced investment trends, which may impact long-term employment and production growth.

Positive Savings Growth:

  • The local savings rate showed improvement, reaching 7.4% in 2022/23 and 7.6% in 2023/24.

  • This increase points to potential future domestic investment opportunities.

Growth in Total Domestic Production:

  • Nepal achieved a total domestic production of NPR 5704.8 billion in 2023/24, indicating economic expansion.

  • However, sustaining this growth will require structural improvements and increased investment.

To ensure long-term growth, Nepal must improve its environment for both domestic and foreign investment. Strengthening economic foundations through export promotion, job creation, and expanding production capabilities is essential. The government should implement policies that encourage investment of high savings rates into productive sectors. Overall, the economic indicators from 2023/24 suggest that Nepal needs comprehensive plans to strengthen its economy and address ongoing challenges.

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