A recent report of the World Bank has projected Nepal’s economic growth by only 0.6 per cent in 2021, which is slightly up from an estimated 0.2 percent in 2020, as extended lockdowns, caused by the COVID-19 pandemic, brought the economic activities to a complete standstill for more than 4 months, hitting tourism and industrial sector hard. The report ‘South Asia Economic Focus, Fall 2020: Beaten or Broken? Informality and COVID-19’ further states that South Asia is set to plunge into the worst-ever recession in the year 2021. The pandemic will take a disproportionate toll on informal worker and push millions of South Asians into extreme poverty.
By the same token, a recent unpublished report prepared by the National Planning Commission (NPC), the apex advisory body of the Government of Nepal for formulating a national vision, periodic plans, and policies, has stated that the economic growth of the country would remain at o.6 per cent in the last fiscal year 2076/77 BS. Earlier, the NPC had projected the Gross Domestic Product (GDP) growth at 2.27 per cent. The NPC report has shown that poverty has increased by 4 per cent due to the COVID-19 pandemic. It has pushed more than 1.2 million people into acute poverty.
The informal sector makes up around half of the total business and enterprises in Nepal and they are the major source of income for most of working-class people. Within this sector, urban informal sector workers and self-employed households in the cities are more vulnerable than rural households. Due to their operation with limited savings and very short-term plans, most of the informal firms in the urban areas have no choice. They neither could stay home nor could run their businesses risking infections. Thus, the economic consequences of the pandemic for the livelihoods of informal workers, or those without social security or assistance, are acute and more likely at risk of falling into extreme poverty.
Many urban workers, especially those involved in the informal sector, left cities during the lockdown. The long lines of people walking along the highway in the scorching heat with their backpacks and kids for days without food and water made big headlines in the newspapers. But very few knew the reality behind it. The long and arduous journey made by the urban labourers during the first lockdown revealed the pathetic the condition of the urban poor. As they had no choice, they had to rush to their villages, where they could make a living by engaging themselves in subsistence farming or other casual works.
With the imposition of first lockdown that was extended up to 10 months, many industries still remain closed. About two-thirds of the businesses in the country were badly affected by the coronavirus pandemic and subsequent lockdown. Only 4 per cent businesses and enterprises ran in full-fledged and about 35 per cent operated partially. Tourism, education, hotel/hospitality, restaurant, aviation and entertainment sectors were the hard hit sectors during the pandemic and it may take years for them to come to normal.
The gloomy picture showed in the aforementioned reports indicates that the days ahead are not cheerful for the country and its economy. It is sure that the COVID-19 pandemic will have profound and lasting scars on its economy. Already hit hard by the long and prevailing political upheaval and massive earthquake of 2015, the country had witnessed a prospect of resilient recovery with the promulgation of the new constitution in 2015 and general elections in 2017. The economic growth and improved business environment in the past few years had raised a ray of hope and optimism among the people. However, the COVID-19 pandemic and the recent dissolution of the House of Representatives has further pushed the country into political chaos, instability and uncertainty.
The lack of universal social protection measures and policies to support the downtrodden population has also created a huge gap among the haves and have-nots. For this, the government should design universal social protection programmes as well as policies that boost productivity, skills development and human capital. In that effort, securing international and domestic investment and financing will help the government fund a crucial programme to speed up recovery.
Therefore, swift action is needed to provide incomes, social protection and employment to the people who have lost jobs and livelihood opportunity. This includes key investment climate reforms to promote physical infrastructure and access to finance for the informal sector to shorten the transition to recovery. Partnership with the local private sector and increasing their investment could be another tool to make a quick recovery. The government should take them into confidence and ensure a good return of their investment, or else the COVID-19 pandemic will not only further increase inequalities and widen the gap between the rich and poor, but also push millions of people into abject poverty and hunger. (Source: The Rising Nepal)
(Pokharel is a TRN journalist)