This macroeconomic report is prepared based on annual data of FY 2020/21 published by NRB. The key macro-economic indicators and variables are highlighted in the table below, and explained in further section:
A.NEPSE and Ratio of Market Cap to GDP
The NEPSE index at Mid-July 2021 increased remarkably by 111.65% to close at 2883.38 points, compared to 1362.35 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 1,792.76 billion in Mid-July 2020 to NPR 4,010.96 billion in Mid-July 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-July 2021 has increased to 94.0% compared to 45.8% in the last year during the same review period.
The GDP growth rate for the F/Y 2020/21 was 4.01% which was -2.09% for the F/Y 2019/20. The highest GDP growth rate was 8.98% for the F.Y 2016/17 in the past ten years.
To evaluate the current scenario of interest rate in the economy, interbank rate and base rate of commercial banks are taken into consideration.
The interbank rate of commercial banks had decreased to 0.10% in Mid-Dec, 2020 which has been gradually rising since then and has reached to 4.12% in Mid-July 2021 indicating tightening of liquidity in the banking system compared to Mid-Dec 2020. The interbank rate during the same period a year ago stood at 0.35%.
The base rate of commercial banks stands at 6.86% in Mid-July, 2021 compared to 8.50% a year ago. This has set the weighted average lending rate at 8.43%. On the other hand, the weighted average deposit rate stands at 4.65%. Such rates were 10.11% and 6.01% respectively in the corresponding month of the previous year.
The consumer price inflation which was 4.78% a year ago declined to 3.60% in Mid-July 2021. Food and beverage inflation stood at 5% whereas non-food and service inflation stood at 2.51 % in the review period. The average consumer price of ghee and oil; pulses and legumes; tobacco products; and transportation sub-groups rose 17.54%, 10.65%, 9.83% and 6.41% respectively on annual basis.
E.DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-July 2021 increased by 20.63% to NPR 4,740.9 billion, compared to NPR 3,930.2 billion in Mid-July 2020. The increase during the same period last year was 17.18%. The share of demand, saving, and fixed deposits in total deposits stands at 10.4%, 34.2 % and 47.0 % respectively in mid-July 2021. Such shares were 10%, 31.9 % and 48.6 % respectively a year ago. The share of institutional deposits in total deposit of BFIs stands at 42.7 % in mid-July 2021. Such a share was 44.3 % in mid-July 2020.
Credit Growth: The credit disbursement of BFI’s as at Mid-July2021 increased to NPR. 4712.79 billion by 27.76%, compared to NPR 3,266.01 billion in Mid-July 2020. The growth during the same period last year was 12.16%. Outstanding loan of BFIs to the agriculture sector increased 43.6 percent, industrial production sector 20.6 percent, construction sector 18.4 percent, transportation, communication and public sector 20.4 percent, wholesale and retail sector 26.2 percent and service industry sector 20.9 percent in the review period. In the review period, term loan extended by BFIs increased 29.7 percent, overdraft 29.8 percent, demand and working capital loan 25.4 percent, real estate loan (including residential personal home loan) 15.8 percent, margin nature loan 110.8 percent and trust receipt (import) loan 48.7 percent while that of hire purchase loan decreased 7.7 percent.
Summary of Monetary Operation during twelve months of FY 2020/21
In the review period, NRB mopped up Rs.303.29 billion liquidity of which Rs.109.54 billion was through reverse repo auction and Rs.193.75 billion through deposit collection. In the review period, NRB injected liquidity of Rs.438.28 billion of which NPR 67.94 billion through Repo and NPR 370.34 billion through standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.78 billion liquidity was mopped up consisting of Rs.48 billion through reverse repo auction and Rs.30 billion through deposit collection. On the other hand, Rs.219.15 billion liquidity was injected of which Rs.115.87 billion was through repo and Rs.103.28 billion through standing liquidity facility (SLF) in the corresponding period of the previous year. In the review period, NRB injected liquidity of Rs.428.54 billion through the net purchase of USD 3.62 billion from foreign exchange market. Liquidity of Rs.492.4 billion was injected through the net purchase of USD 4.21 billion in the corresponding period of the previous year.
In the twelve months of 2020/21, total revenue collected by the government till mid-July 2021 is Rs. 938.32 billion which is 18.21% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-July 2021 is Rs.1180.95 billion which is 8.21% higher than that of the expenditure on the corresponding month of previous fiscal year.
H. BALANCE OF PAYMENT POSITION
The country’s BOP position is at surplus in the twelve month of FY 2020/21 by NPR 1.23 billion compared to a surplus of NPR 282.41 billion during the same period last year. On the other hand, the current account is at deficit of NPR 333.67 billion compared to a deficit of NPR 33.76 billion in the same period of last year. In the review period, capital transfer increased 7.4 percent to Rs.15.26 billion and net foreign direct investment (FDI) increased 0.2 percent to Rs.19.51 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.14.21 billion and Rs.19.48 billion respectively.
The workers’ remittance growth rate is subject to different terms of US Dollar and Nepalese Currency based on exchange rate of NPR with US Dollar. Hence, the workers’ remittance growth in terms of US Dollar and NPR has been presented below: Remittance in Dollar Terms
In US Dollar terms, the workers’ remittance increased by 8.19% to NPR 8149.90 million during the twelve months in FY 2020/21 compared to a decrease of 3.31% during the same period in FY 2019/20.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 9.83% to NPR 961.05 billion during the twelve months in FY 2020/21 compared to a fall of 0.49% during the same period in FY 2019/20.
Net transfer increased 9.1% to Rs. 1071.35 billion in the review period. Such a transfer had decreased 1.5% in the same period of the previous year. As per the data of Department of Foreign Employment, number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment decreased 62.8 percent in the review period. It had decreased 20.5 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 46.8 % in the review period. It had decreased 34.7 % in the same period of the previous year.