Seven sectors shrink in third quarter, dimming hopes of economic rebound

Nepal's economic momentum remains sluggish, with recent data revealing a downturn across seven major sectors in the third quarter of the current fiscal year. The National Statistics Office reported negative growth in agriculture, manufacturing, accommodation and food services, information and communication, financial and insurance activities, education, and other services compared to the previous quarter. This slowdown has dimmed hopes for a robust economic rebound.

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The quarterly accounts show that expected improvements have not taken place in several sectors of the economy.

Overall economic activity grew by a mere 0.58 percent in the third quarter (mid-January to mid-April), a noticeable dip from the 0.92 percent growth seen in the second quarter. While the economy is estimated to have expanded by 3.51 percent year-on-year, this pace is slower than the 4.05 percent growth recorded in the same period last year. The limited annual growth was primarily supported by increased electricity generation, higher bank deposits and lending, and expansion in trade-related services.

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The fact that seven sectors recorded negative growth compared with the previous quarter, while growth in many of the sectors that remained positive was modest, indicates that economic activity has not improved.

Economists point to several factors contributing to this weak performance. Dhundi Raj Lamichhane, spokesperson for the National Statistics Office, cited sluggish agricultural growth, inadequate government spending, and a lack of significant growth in imports of machinery and construction materials. "The fact that seven sectors recorded negative growth compared with the previous quarter, while growth in many of the sectors that remained positive was modest, indicates that economic activity has not improved," Lamichhane stated. He specifically noted that reduced government expenditure and declining imports of construction materials have negatively impacted the construction and related industries, underscoring a broader economic malaise.

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On one hand, government spending has not increased. On the other hand, imports of construction materials have declined significantly, affecting the construction sector.