Covid 19 Nepal's Economy

Effects of COVID-19 lockdown in Nepal’s Economy

  • blog
  • 23rd Sep, 2020
Covid 19 Nepal's Economy

COVID-19 has made a huge negative impact in the World's Economy. In the context of Nepal's Economy, over 90% of economic activities have come to a grinding halt during this lockdown period affecting almost every sector.

1. Agricultural sector

Agriculture remains Nepal's prime economic activity, employing about 65% of the population and providing 31.7% of GDP.

This COVID-19 lockdown has widely affected Nepal’s economy through agricultural input crunch including lack of workers, lack of proper fertilizers, difficulty in harvesting winter crops, difficulty in connecting to agricultural markets, and not getting the proper value for harvested summer crops. This lockdown resulting in a reduction of domestic demand, closure of processing companies, and proper markets has compelled farmers to dump milk and vegetables which led to the sudden price hike, black marketing, and shortage of products in local markets.

2. Tourism Industry

Tourism is one of the major sectors contributing to 8% of Nepal’s economy. With the launch of the Visit Nepal 2020 campaign in January, the country was hopeful in welcoming millions of visitors but unfortunately, COVID-19 ruined it all, shattering the hospitality and tourism-related business.

Nepal’s tourism sector is responsible for generating Rs. 240.7 billion in revenue and supported more than 1.05 million jobs. The tourist arrival rate dropped from 70% to 10% due to this Covid-19 outbreak canceling all the spring mountaineering expeditions and trekkings. This resulted in the loss of around 20,000 jobs for tourist guides hugely affecting the economy of the country.

3. Transportation sector

Covid-19 lockdown resulted in shutting down all the transportation sectors resulting in joblessness in the number of thousands. Due to restrictions on people and vehicles movement, the supply chain of goods and essentials was highly disrupted affecting severely on the country's economy.

Lockdown also made people get stuck and restricted them to return to their respective hometowns making the situation worse. This impacted more on low-income people resulting in poverty.

Moreover, with the implementation of a country-wide lockdown on 24 March, all the international flights were banned resulting in the stranding of thousands of Nepalese in different parts of the world. A large number of Nepalese labor migrants and students were not able to return to their respective destinations resulting in serious issues affecting the country’s economy.

4. Decreased Remittances

Foreign employment has not only solved the problem of unemployment in Nepal but has been highly contributing to the country’s economy through remittance. The remittance income contributes to about 26% of total economic growth.

The pandemic resulting in Lockdown almost all around the world has hugely impacted in remittance inflow.

The majority of the destination countries attracting outbound workers have announced lockdown affecting the government revenue collection. In these past 5 months of Lockdown, the remittance source has contributed less than 1% to the country's economy.

5. Formal and informal businesses

This pandemic has hit all types of business industries from small to large and both formal and informal ones. With 60% of workers being jobless and a 90% decline in monthly income, all levels of workers have been affected.

The impacts of lockdown are visible in manufacturing industries where most of the raw materials come from China. Resulting in the complete shutdown of such industries. The decline in imports is highly affecting retail and wholesale trade. The contributes to the second largest GDP in Nepal’s economy. Moreover, due to such limited supply from China, the future possibility of exporting goods from third countries may take place resulting in costlier products.

The World Bank has press release about Nepal Economy too. You can check Covid-19 Lockdown and Increased Pregnancy.