Impact of Covid-19 on Economic Activities of Nepal: ADB Estimates

The Asian Development Bank estimates show that GDP growth is likely to fall as low as 4.3 percent in 2020 if the Covid-19 becomes more severe in the coming months. The pandemic is likely to hard hit the industry and manufacturing sector of the economy. Some of the areas to face such hit are: tourism, remittances, construction and manufacturing industries and trade. On the demand side, slack in demand will further underlie the contraction in economic activities. 

ADB has estimated the loss ranging from 1.0 percent of GDP to 2.0 percent of GDP depending on the three scenarios. In nominal terms, such loss amounts to be Rs. 30 billion to Rs. 62 billion. (These estimates have been derived by converting the loss estimates at constant prices into nominal terms using the GDP deflator.)  

First Scenario :  Under the scenario developed as of March End, Nepal will face a loss equivalent to 1 percent of GDP. This figure is about 8.56 billion NRs at constant prices and about 30 billion NRs at current price.

Second Scenario :  If the lock-down is continued for weeks, such loss will be as high as 1.6 percent of GDP. It is about 13.86 at NRs at constant prices and 50 billion NRs at current prices. 

Third scenario:  If the nationwide lock down is continued for 1-2 months with the sporadic rise of COVID-19 cases in Nepal, the loss in economic activities will be as high as 2 percent of GDP. This is equivalent to 16.95 billion NRs at constant prices and about 62 billion NRs at current prices.

Source : Macroeconomic Update,  April 2020: ADB

Accordingly, the growth rate could fall to as low as 4.3 percent in 2020 if the worst scenario assumed above happens.

Source : Macroeconomic Update,  April 2020: ADB

 Services sector will bear about three fifth to two-third of the loss while about one-fifth to one-quarter of the loss has to be borne by industrial sector and and the rest 12 to 16 percent by the agriculture.

Distribution of Loss (percent)

	Scenario I	Scenario	Scenario III
Agriculture	12.5	12.0	16.1
Industry	20.1	25.6	25.0
Services	67.4	62.4	58.9
Total Loss	100	100	100
Calculated from ADB Data

 The ADB report can be found here.