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Nepal was affected by the global economic slowdown due to the 11 September events that worsened the trade and investment of other countries in the region. In particular, Nepal’s tourism and trade were adversely affected. In the year ending November 2001 tourist arrivals declined by 17.0 per cent, exports by 8 per cent, and imports by 3.5 per cent.
Although the 2002 budget is not as ambitions as 2001’s, it is still expansionary, with a total outlay of NRs90.1 billion, representing an increase of 22 per cent over an estimated NRs74 billion in the previous year. The budget calls for a 27 per cent increase in development expenditures to be financed in greater part by grant assistance. Nevertheless, the budgetary target will be very difficult to achieve. Development spending is likely to be severely curtailed due to increasing expenditures on security operations and the adverse impact of the insurgency on development projects and programmes. The government has recently indicated that about 25 per cent of the 2002 development budget will be reallocated to additional security expenditures. Estimates for domestic revenues in the 2002 budget, with a projected growth rate of 22 per cent, also appear optimistic, given the sharp downturn in the main tax sources of manufacturing and services.
Faced with an upsurge of insurgency and a worsening security situation, Nepal’s economic growth is expected to decline to, at the most, 3.5 per cent in 2002 from 5 per cent in 2001. Assuming that the security situation improves, growth could potentially recover to about 5 per cent in 2003, according to the Asian Development Bank. The Asian Bank growth forecasts for 2002-2003 are based on assumptions that, in addition to an improved security situation, the global economic slowdown and the impact of September 11 events on the global economy will he modest and short-lived. The continued good performance of India’s economy should also help Nepal.
The GDP in Myanmar grew by 13.7 per cent in FY2000 (ending 31 March 2001). Although agriculture sector growth moderated in FY2000, a spurt in manufacturing activity helped support aggregate growth. As a consequence of the growth of central bank credit, inflation reached an average of around 21.0 per cent in the l990s. However, in FY2000, inflation fell, with prices decreasing by 1.7 per cent, due to ample food supply, reduced deficit spending and recourse to inflationary finance, and the introduction of tax-free markets. By March 2001, prices were rising again, continuing throughout the year. The overall public sector deficit has averaged around 5.0 per cent of the GDP. In FY2000, the deficit rose to 109.7 billion kyat (MK) from MK9l.9 billion a year earlier. To pare the deficit, the government cut expenditure. However, the deficit was also caused by poor revenue mobilization and losses in some state economic enterprises.
Severe macro-economic imbalances threaten any sustained growth prospects. Perennial government deficits and their financing through central bank credit expansion act as implicit taxes on the private sector, distort resource allocation, and underpin the sustained depreciation of the domestic currency. Distortions in the foreign exchange market have reached unprecedented proportions with the ratio of the parallel to the official exchange rates now about 100:1.
Economic performance in the Maldives was favourable prior to the September 11 events, but came under stress with the recent adverse global developments, in particular after the 11 September events. Tourism, which accounted for more than one third of the GDP, stagnated. Concerns over travel safety and declines in consumer spending and confidence significantly reduced tourist arrivals in the Maldives. Overall tourism was estimated to have contracted by 0.5 per cent in 2001, compared with 6.0 per cent growth per annum in recent years. This had a spillover effect on other sectors, reducing the GDP grown in 2001 to 2.1 per cent from 4.6 per cent in 2000.
The fiscal deficit increased from 4.9 per cent of the GDP in 2000 to 5.3 per cent of the GDP in 2001. Money supply increased by 9.0 per cent but inflation remained as low as 0.7 per cent. The trade deficit was estimated to have deteriorated by 3.7 per cent and reached 42.5 per cent of the GDP in 2001 from 41.6 per cent of GDP in 2000. Overall current account deficit expanded by 17.0 per cent and was posted at 10.9 per cent of the GDP in 2001 from 9.5 per cent of the GDP in 2000. As for capital account, net non-monetary capital inflow for 2001 declined by 20 per cent.
