October 13: The International Monetary Fund (IMF) has projected Nepal’s economy to grow by 4.2 percent in the current fiscal year. The IMF made such projection while releasing the October issue of the World Economic Outlook. The report says that Nepal’s economy will grow by 5 percent in 2023 and by 5.3 percent by 2027.

According to the report, inflation in Nepal will rise to 8.1 percent in the current fiscal year and this rate will drop to 7.1 percent in 2023

Similarly, the current account deficit of Nepal will remain 12.1 percent in the review period.

The IMF report also predicted the world economy to shrink to 3.2 percent in 2022.

According to the report, global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades.

The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook.

“Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic,” reads the report.

Similarly, global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.

The report suggests that monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy.

“Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.”

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