2-8 June 2017 #861

WHITE SWANS

The Black Swan Theory is used by business experts to classify events that disrupt a planned trajectory of a company, or a nation’s economy. Nepal’s recent history has been filled with flocks of black swans.


Read also:

Nepal 2030, Guest editorial

Taking politics out of economy, Om Astha Rai


Despite the aftershocks of earthquakes and a Blockade, political uncertainty over the constitution and elections, a stagnant investment climate, the budget passed this week by a caretaker government finally offered a white swan. The glimmer of hope was that despite a 6.5% growth prediction for the last fiscal year, Nepal achieved 6.94% (See report).

Boosted by last year’s healthy monsoon, an end to crippling power cuts, post-earthquake reconstruction, and pulled along by the Indian economic locomotive, this is the highest growth rate Nepal has seen in more than two decades. The question is whether it is sustainable given that the investment climate is still not favourable, the bureaucracy moves in slow motion, there is rampant corruption, extortion and lingering uncertainty about whether provincial and parliamentary elections can be held.

In its Nepal Country Economic Memorandum 2017 published last week, the World Bank warns that Nepal may fail to graduate from our Least Developed Country (LDC) status to lower middle income status (where the average annual per capita income crosses $1,025) by 2030 if we continue to have a mismatch between poverty reduction and economic growth. How to translate Nepal’s improvements in its Human Development Index into economic growth is a relevant question.

The World Bank’s deliberate pessimism is puzzling, unless the idea is to shake up the government. It is true that to not make the report a self-fulfilling prophecy, Nepal needs to take some steps to sustain its 7% growth and double its GDP in the next decade, as economist Swarnim Wagle argues in his Guest Editorial.

We share his cautious confidence that with new investment laws in place and the politics stabilising, Nepal can sustain an infrastructure-led growth that will lead to job creation and an economic multiplier.

Read also:

Bleak economic report

22 governments in 26 years, Manish Jha

Stability for growth

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