Effects of recession on Nepal and various sectors and industries due to COVID-19:
The continuous positive tests and reported deaths in other countries due to novel corona virus (COVID-19) has created widespread concerns in Nepal also. Nepal is starting to suffer the most widespread cessation of economic activity due to outbreak of this virus. As per the analysis by the Asian Development Bank, the outbreak of this deadly disease will hit almost every sector of the Nepali economy. We can see the impact on the number of sectors such as tourism, trade and production linkages, supply and health. Especially the entire service industries: tourism, aviation and hospitality sector have been hit hardly
We can see the following effects from the beginning of this outbreak:
1. With the launch of visit Nepal 2020 campaign in January, the country was in hope to attract two million visitors, but due the corona pandemic the campaign got cancelled which has shattered the hospitality and tourism related business sector. With this the tourist arrival rate has declined to below 10 percent, from 70 percent before the Covid-19 outbreak which resulted in job loss of around 13,000 tour, trekking and mountain guides. Tourism sector, being one of the largest industry has been contributing 8 percent to Nepal’s economy.
2. Banks are suffering in loss of their investments in hospitality and aviation due to the coronavirus.
3. The impact has been also seen in the manufacturing industries. As most raw materials including pharmaceutical chemicals come from China, supply of these raw materials has decreased drastically.
4. The remittance from foreign employment contribute approx. 26% of the country’s GDP. After the outbreak of this virus, most of the countries announced lockdown which resulted in decline in import of foreign remittance. In these two months the remittance source has been contributed less than 1% in country’s economy. The downturn in remittance has created severe impact on overall consumption in the country.
5. The decline in remittances will affect consumer demand, leading to further slowdown in the economy. This will have multiple effects, including its effects on revenue, employment and earnings of the workers. In that situation, it will hit hard to the financial sector.
6. The wholesale and retail sector is the second largest contributor to the economy, after agriculture. The sector contributes 14.37 percent to the economy, which is already being affected by the drastic downfall in imports from China following the outbreak of the disease.
7. We can also see a high risk of general inflation, which will further result in importing the products from the third country due to limited supply from china. Importing products from third country may become more costly.
8. While there has been little impact on trade with India, which accounts for around 65 percent of Nepal’s trade, there are signs that things will not remain the same.
9. It is likely that some of these projects, which are already running far behind schedule, could face further delays. All this is expected to raise project costs.
10. Nepal being one of the least developed economy, it has to rely on foreign aid for various developmental activities. Due to this outbreak the inflow of foreign aid is assumed to decline due to hard time for donor countries.
11. The upcoming recession will force businesses, families and individual to cut the expenses as well as decrease in purchasing power of the consumer can be observed.
12. It is likely to have the shortage of cash in the market and cash crisis which will ultimately result in restrictions in advancing the loans to the business and individuals by the banking and financial intuitions.
13. We can also see the development in e-commerce, Logistics and delivery etc. due to this outbreak and lockdown.
As we can see that the almost all major sector of the economy is affected which constitute the major part of country’s GDP. Whereas the positive rise of ecommerce business can be seen.