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Current Macroeconomic and Financial Situation English Based on Annual data of 2022
Research Work (BBS 250)
Tribhuvan Vishwavidalaya
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Nepal Rastra Bank
Economic Research Department, Baluwatar, Kathmandu
Current Macroeconomic and Financial Situation of Nepal
(Based on Annual Data of 2022/23)
Real Sector
National Statistics Office has estimated economic growth at producers’ price to be 1 percent for 2022/23. Agriculture, industry and service sectors are estimated to grow 2 percent, 0 percent and 2 percent respectively.
Share of agriculture, industry and service sectors in GDP stands 24 percent, 13 percent and 62. percent respectively in 2022/23 (Table 1).
The ratio of gross domestic saving to GDP stands 6 percent in 2022/23. Ratio of gross fixed capital formation and gross national saving to GDP stands 25 percent and 31 percent respectively.
The installed capacity of electricity increased to 2684 Megawatt in 2022/23, which consists of 2537 Megawatt of hydro electricity, 87 Megawatt of solar, 6 Megawatt of cogeneration and 53. Megawatt of thermal electricity.
Table 1: Share in GDP (Percent) Sectors 2020/21 2021/22 R 2022/23P Agriculture* 25 24 24. Industry 13 14 13. Service 60 61 62. Real GDP Growth (Percent) GDP growth 4 5 1. Agriculture* 2 2 2. Industry 6 10 0. Service 4 5 2.
- Agriculture, Forestry and Fishing P: Preliminary estimation. R: Revised estimation Source: National Statistics Office
Major Highlights
Annual average Inflation remained 7 percent. Imports and exports decreased 16 percent and 21 percent respectively. In the previous year, imports increased 24 percent and exports increased 41 percent. Remittances increased 21 percent in Nepalese rupee and 12 percent in USD.
Balance of Payments remained at a surplus of Rs.290 billion compared to a deficit of Rs.255 billion last year. Gross foreign exchange reserves stood at USD 11 billion. This level of foreign exchange reserve is sufficient to cover the merchandise and services imports for 10 months.
Broad money (M2) expanded 11 percent. Deposits at Banks and Financial Institutions increased 12 percent and private sector credit increased 3 percent. Total deposits at BFIs stood at Rs billion and private sector credit amounted to Rs billion.
- The total number of tourist arrivals increased significantly to 8,62,992 in 2022/23, which was 3,74, in the previous fiscal year.
Inflation
Consumer Price Inflation
The annual average consumer price inflation stood at 7 percent in FY 2022/ compared to 6 percent a year ago.
Under the food and beverage category, the annual average consumer price index of restaurant & hotel sub-category increased 14 percent, spices 12 percent, cereal grains & their products 10 percent, tobacco products 9 percent and milk products & eggs 9 percent.
Likewise, under the non-food and services category, the annual average consumer price index of transportation sub-category increased 13 percent, recreation & culture 10 percent, health 10 percent, education 8 percent and housing & utilities 8 percent.
The y-o-y consumer price inflation stood at 7 percent in mid-July 2023 compared to 8 percent a year ago.
Food and Beverage Category Inflation
The annual average inflation of food and beverage category stood at 6 percent in 2022/23 compared to 5 percent a year ago.
The y-o-y food and beverage category inflation stood at 7 percent in mid-July 2023 compared to 6 percent a year ago.
Non-food and Service Category Inflation
The annual average non-food and services category inflation stood at 8 percent in 2022/ compared to 6 percent a year ago.
The y-o-y non-food and services category inflation stood at 7 percent in mid-July 2023 compared to 9 percent a year ago.
Table 2: Annual Average Consumer Inflation
Particulars
Percent 2020/21 2021/22 2022/ Consumer Price Inflation 3 6 7. Food and Beverage 5 5 6. Non-Food and Service 2 6 8.
Percentage
Chart 1 : y-o-y Consumer Price Inflation
Overall Inflation Food and Beverage Non-Food and Service
paper, among others, increased whereas imports of transport equipment & parts, M. billet, medicine, petroleum products, crude soyabean oil, among others, decreased in the review year.
Based on customs points, exports from Bhairahawa, Dry Port, Jaleshwor, Krishnanagar, Mechi, Rasuwa, Tatopani and Tribhuwan Airport Customs Offices increased whereas exports from all the other major customs points decreased in the review year. On the import side, imports from Rasuwa Customs Office increased whereas imports from all the other major customs points decreased in the review year.
Total trade deficit decreased 15 percent to Rs.1454 billion in the review year. Such a deficit had increased 23 percent in the previous year. The export-import ratio decreased to 9 percent in the review year from 10 percent in the previous year.
In the review year, merchandise imports from India against payment in convertible currency amounted to Rs.154 billion. Such imports was Rs.213 billion in the previous year.
Composition of Foreign Trade
As per the Broad Economic Categories (BEC), the intermediate and final consumption goods accounted for 54 percent and 44 percent of the total exports respectively, whereas the ratio of capital goods in total exports remained negligible at 0 percent in 2022/23. In the previous year, the ratio of intermediate, capital and final consumption goods remained 47 percent, 0 percent and 52 percent of total exports respectively.
On the imports side, the share of intermediate goods remained 53 percent, capital goods 8 percent and final consumption goods remained 38 percent in the review year. Such ratios were 52 percent, 10 percent and 37 percent respectively in the previous year.
Export-Import Price Index
- The y-o-y unit value export price index, based on customs data, increased 3 percent, whereas the import price index decreased 5 percent in the twelfth month of 2022/23. The terms of trade (ToT) index increased 9 percent in the review month against a decrease of 10 percent a year ago.
Services
Net services income remained at a deficit of Rs.83 billion in 2022/23 compared to a deficit of Rs.108 billion in the previous year.
Under the service account, travel income increased 89 percent to Rs. 61 billion in the review year which was Rs.32 billion in the previous year.
Under the service account, travel payments increased 48 percent to Rs.144 billion, including Rs.100 billion for education in the review year. Such payments were Rs.97 billion and Rs. billion respectively in the previous year.
Remittances
Remittance inflows increased 21 percent to Rs.1220 billion during 2022/23 compared to an increase of 4 percent in the previous year. In the US Dollar terms, remittance inflows increased 12. percent to 9 billion in the review year compared to an increase of 2 percent in the previous year.
Number of Nepali workers (institutional and individual-new) taking approval for foreign employment increased 40 percent to 497,704 in the review year. It had increased 392 percent in the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 1 percent to 277,272 in the review year. It had increased 198 percent in the previous year.
Net transfer increased 20 percent to Rs.1348 billion in the review year. Such a transfer had increased 4 percent in the previous year.
Current Account and Balance of Payments
The current account remained at a deficit of Rs.72 billion in the review year compared to a deficit of Rs.623 billion in the previous year. In the US Dollar terms, the current account registered a deficit of 557 million in the review year compared to deficit of 5 billion in the previous year.
In the review year, capital transfer decreased 24 percent to Rs.7 billion and net foreign direct investment (FDI) remained Rs.5 billion. In the previous year, capital transfer and net FDI amounted to Rs.9 billion and Rs.18 billion respectively.
Balance of Payments (BOP) remained at a surplus of Rs.290 billion in the review year against a deficit of Rs. 255 billion in the previous year. In the US Dollar terms, the BOP remained at a surplus of 2 billion in the review year compared to a deficit of 2 billion in the previous year.
Foreign Exchange Reserves
Gross foreign exchange reserves increased 26 percent to Rs.1539 billion in mid-July 2023 from Rs.1215 billion in mid-July
- In the US dollar terms, the gross foreign exchange reserves increased 23 percent to 11 billion in mid-July 2023 from 9. billion in mid-July 2022.
Of the total foreign exchange reserves, reserves held by NRB increased 27 percent to Rs. 1345 billion in mid-July 2023 from Rs. 1056 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) increased 21 percent to Rs. 193 billion in mid-July 2023 from Rs.159 billion in mid-July 2022. The share of Indian currency in total reserves stood at 22 percent in mid-July 2023.
Foreign Exchange Adequacy Indicators
- Based on the imports of 2022/23, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 11 months, and merchandise and services imports of 10 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 28. percent, 83 percent and 25 percent respectively in mid-July 2023. Such ratios were 24 percent, 57 percent and 22 percent respectively in mid-July 2022.
International Investment Position (IIP)
- Foreign assets and liabilities of the country stood at Rs.1654 billion and Rs.1729 billion respectively in mid-July 2023. Accordingly, net IIP remained at a deficit of Rs.74 billion in mid- July 2023. Net IIP was in deficit of Rs.271 billion in mid-July 2022.
Price of Oil and Gold
- The price of oil (Crude Oil Brent) in the international market decreased 32 percent to US dollar 75. per barrel in mid-July 2023 from US dollar 112 per barrel a year ago. The price of gold increased 14 percent to US dollar 1953 per ounce in mid-July 2023 from US dollar 1706 per ounce a year ago.
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Chart 3: Gross Foreign Exchange Reserves (Mid-July)
Province Government
- In the review period, total expenditure and resource mobilization of provincial governments based on banking transactions stood at Rs.204 billion and Rs.199 respectively. Of the total resource mobilization, the grants and revenue transferred from Nepal government remained Rs.148 billion and revenue and other receipts of the provincial government amounted Rs.50 billion in the review period.
Monetary Situation
Money Supply
Broad money (M2) expanded 11 percent in 2022/23 compared to the growth of 6 percent in the previous year.
The net foreign assets (NFA after adjusting foreign exchange valuation gain/loss) increased Rs. billion (26 percent) in the review year in contrast to an decrease of Rs.255 billion (19 percent) in the previous year.
Reserve money increased 10 percent in the review year in contrast to the decrease of 11. percent in the previous year.
Domestic Credit
Domestic credit increased 8 percent in the review year compared to a growth of 14 percent in the previous year.
Monetary Sector's net claims on government increased 34 percent in the review year compared to an increase of 26 percent in the previous year.
Monetary Sector's claims on the private sector increased 4 percent in the review year compared to a growth of 13 percent in the previous year.
Deposit Mobilization
Deposits at Banks and Financial Institutions (BFIs) increased 12 percent in the review year compared to a growth of 9 percent in the previous year.
The share of demand, saving, and fixed deposits in total deposits stands at 7 percent, 26 percent and 58 percent respectively in mid-July 2023. Such shares were 8 percent, 27 percent and 55 percent respectively a year ago.
The share of institutional deposits in total deposit of BFIs stands at 36 percent in mid-July 2023. Such a share was 38 percent in mid-July 2022.
Table 4: Deposits at Banks and Financial Institutions (Percentage Share) Deposits Mid-July 2019 2020 2021 2022 2023 Demand 9 10 10 8 7. Saving 32 31 34 27 26. Fixed 46 48 47 55 58. Other 11 9 8 7 6.
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2018/19 2019/20 2020/21 2021/22 2022/
Growth (In Percent)
Chart 4: Monetary Aggregates (y-o-y, Mid-July)
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Credit Disbursement
Private sector credit from BFIs increased 3. percent in the review year compared to a growth of 13 percent in the previous year.
The shares of private sector credit from BFIs to non-financial corporation and household stand at 62 percent and 37 percent respectively in mid-July 2023. Such shares were 63 percent and 36 percent a year ago.
In the review year, private sector credit from commercial banks, development banks and finance companies increased 3 percent, 7. percent and 0 percent respectively.
In the review year, out of the total outstanding credit of the BFIs, 68 percent is against the collateral of land and buildings and 11 percent against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 66 percent and 12 percent respectively a year ago.
Outstanding loan of BFIs to the agriculture sector increased 6 percent, industrial production sector 8 percent, transportation, communication and public sector 21 percent, wholesale and retail sector 3 percent and service industry sector 3 percent in the review year.
In the review year, term loan extended by BFIs increased 32 percent, real estate loan (including residential personal home loan) 5 percent and hire purchase loan 1 percent while that of trust receipt (import) loan decreased 6 percent, overdraft 67 percent, demand and working capital loan 13. percent, and margin nature loan 5 percent.
Liquidity Management
In the review year, NRB injected Rs.5518 billion liquidity on turnover basis, of which, Rs. billion was through repo, Rs.89 billion through outright purchase auction, Rs.2727 billion through standing liquidity facility (SLF) and Rs.2286 billion through Overnight Liquidity Facility (OLF). Meanwhile, the NRB absorbed Rs.108 billion liquidity including Rs.88 billion through reverse repo auction and Rs billion through deposit collection auction. In the corresponding period of the previous year, Rs.9642 billion net amount of liquidity was injected through various instruments.
In the review year, NRB injected liquidity of Rs.712 billion through the net purchase of USD 5. billion from foreign exchange market. Liquidity of Rs.355 billion was injected through the net purchase of USD 2 billion in the previous year.
The NRB purchased Indian currency (INR) equivalent to Rs.596 billion through the sale of USD 4 billion in the review year. INR equivalent to Rs. 595 billion was purchased through the sale of USD 4 billion in the previous year.
Refinance, Concessional Loan and Business Continuity Loan
The outstanding amount of refinance provided by the NRB remained Rs.1 billion in mid-July 2023.
The outstanding amount of interest-subsidized loan extended to 145,778 borrowers is Rs.197 billion in mid-July 2023. Of which, Rs.135 billion has been extended to 60,350 borrowers for commercial agriculture and livestock businesses. Likewise, Rs.58 billion loan has been extended to 82,
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Growth (In Percent)
Chart 5: Deposit and Credit of BFIs (y-o-y, Mid-July)
Deposits of BFIs Private sector credit
*Updated information is available at emap.nrb.org/
Deposit and Credit Guarantee
Deposit and Credit Guarantee Fund (DCGF) has guaranteed saving, current, call and fixed deposits amounting Rs.1232 billion of 41 million accounts of individuals maintained at 56 banks and financial institutions (BFIs) as of mid-July 2023. In the previous year, Rs.879 billion of 36. million account holders was guaranteed.
DCFG has guaranteed micro and deprived sector loan, small and medium enterprises loan and agriculture loan of BFIs amounting to Rs.216 billion as of mid-July 2023 compared to Rs. billion a year ago.
Capital Market
NEPSE index stood 2097 in mid-July 2023 compared to 2009 in mid-July 2022.
Stock market capitalization in mid-July 2023 stood Rs.3082 billion compared to Rs.2869 billion in mid-July 2022.
Number of companies listed at NEPSE reached 254 in mid-July 2023. Out of the total listing, 136 are Bank and Financial Institutions (BFIs) and insurance companies, 79 hydropower companies, 19 manufacturing and processing industries, 7 hotels, 6 investment companies, 4 trading companies and 3 others. The number of companies listed at NEPSE were 234 in mid-July 2022.
Share of BFIs and insurance companies in stock market capitalization is 63 percent in mid-July 2023. Such a share for hydropower companies is 13 percent, investment companies 7 percent, manufacturing and processing industries 4 percent, hotels 3 percent, trading companies 0 percent and the share of other companies is 8 percent.
The paid-up value of 7 billion shares listed at NEPSE stood Rs.728 billion in mid-July 2023.
Securities worth Rs.372 billion were listed at NEPSE during FY 2022/23. Such securities comprise ordinary share worth Rs.179 billion, government development bond worth Rs billion, bonus shares worth Rs.40 billion, debenture worth Rs.35 billion, mutual fund worth Rs.7 billion, right share worth Rs.4 billion and FPO Rs.37 million.
Table 6: Number of BFIs and their Branches*
Bank and Financial Institutions
Number of BFIs Branches of BFIs mid- July 2021
mid-July 2022
mid-July 2023 mid-July 2021
mid-July 2022
mid-July 2023
Commercial Banks 27 26 20 4753 5009 5049 Development Banks 18 17 17 1023 1118 1128 Finance Companies 17 17 17 222 267 284 Microfinance Financial Institutions 70 65 57 4685 5134 5128 Infrastructure Development Bank 1 1 1 - - - Total 133 126 112 10,683 11528 11589
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2,300 Chart 6: NEPSE Index
- Securities Board of Nepal approved the total public issuance of securities worth Rs.66 billion in the review period which includes ordinary share worth Rs.22 billion, mutual fund worth Rs. billion, right share worth Rs.15 billion and debenture worth Rs.11 billion.
Current Macroeconomic and Financial Situation English Based on Annual data of 2022
Course: Research Work (BBS 250)
University: Tribhuvan Vishwavidalaya
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