Figure 1. Nepal: Recent Macro-Economic Developments

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1 May- May- May- May- Figure. : Recent Macro-Economic Developments Real GDP growth is estimated at. percent in /. Growth rebounded to. percent in /, after a slump due to the earthquakes and trade disruptions. Real GDP Growth (Percent change) Real GDP, Other Real GDP, Agriculture Real GDP (at market prices) / / / / Source: Central Bureau of Statistics. / / / / Recorded remittances amounted to US$ million in May. During the past months they were up percent from a year ago. Remittances Monthly flow (in millions of U.S. dollars, RHS) Y/Y change in mma (in percent) Y/Y change in HP filtered series (in percent) - - Headline inflation amounted to. percent (y/y) in May. Non-food inflation declined to. percent. s inflation has moved broadly in line with s inflation since early. Consumer Price Inflation (Percent change, year-on-year) Non-food items (contribution to headline CPI) Food items (contribution to headline CPI) Non-food CPI (y/y) Headline CPI (y/y) - - Consumer Prices in and (Percent change, year on year) : Headline CPI (y/y) : Headline CPI (y/y) May- May- Sources: i authorities, Haver analytics; and IMF staff estimates. The real effective exchange rate of the i rupee is about percent above the - average. Central bank reserves (including gold and SDR holdings) amounted to US$. billion in mid-may, covering more than months of prospective imports. Exchange Rates (+) Appreciation REER index (=) NEER index (=) USD per NRs (RHS)... Central Bank Gross Reserves and Commercial Banks NFA Reserves in billions of U.S. dollars Reserves in months of prospective imports Commercial banks' NFA (US$bn)... (-) Depreciation..

2 / / / / / / / / / / / / / / Figure. : Recent Fiscal Developments After years of surpluses, rising current and capital spending led to a deficit of. percent of GDP in /. Fiscal Performance Revenue Capital expenditure Current expenditure Overall balance Reflecting the growth rebound, s net public debt remained at percent of GDP in /. Public Debt Central bank overdraft ((-) indicates deposit) Domestic debt External debt Net public debt - / / / / May- / / / / Note: Overall balance: incurrence of net liabilities (incl. government deposits at NRB). Sources: i authorities; and IMF staff estimates FCGO data indicates that revenues rose by percent (year-on-year) during the last months. In June, the y/y increase was - percent. Government Revenue Jun- Jun- Jun- Total revenue (annual average change) Total revenue (y/y change in mma) Jun- Jun- Jun- Jun- Jun- Jun Central government spending rose percent (y/y) during the last months. This includes the rd transfer from the central government to local governments (NR billion). Government Spending - Jun- Jun- Jun- Current and capital spending (annual average change) Current and capital spending (y/y change in mma) Jun- Jun- Jun- Jun- Jun- Jun- - Gross domestic debt amounts to about NR bn. The monetary data indicates that government deposits at the NRB amount to NR bn (NR bn from local govs.) Government Net Domestic Debt Domestic public debt Government overdraft (+)/deposit(-) at the NRB Net domestic public debt

3 Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- May- May- Figure. : Recent External and Monetary Sector Developments Imports and exports are up by and percent, respectively, from a year ago. Private credit growth firmed to percent in May, but is still lower than the high of percent in February Trade and Private Sector Credit (Growth, in percent) Exports (y/y change in mma) Imports (y/y change in mma) Private Sector Credit (y/y) Strong imports are raising the trade deficit. In recent months firming remittances are cushioning the impact on the current account. In the first months of / the current account was in deficit by US$.bn., - - Current Account Balance (In millions of US dollars) Trade Deficit (mma) Remittances (mma) Current Account Balance (mma) Reserve money expanded by percent (y/y) in May Central Bank Balance Sheet (In percent, contribution to reserve money growth) Net claims on government Net foreign assets Other net domestic assets Reserve money growth (y/y) May Amid firming private sector credit growth, M growth rose to percent (y/y) in May. Broad Money Growth (In percent, contribution to broad money growth) Net claims on government Other net domestic assets Net foreign assets Private sector credit M growth - - May- - - Commercial banks interest rates are inching up. Interbank interest rates are stabilizing above percent on implementation of the interest rate corridor. : Interest Rates (Percent) Weighted Average Lending Rate (Commercial Banks) Weighted Average Deposit Rate (Commercial Banks) Interbank Rate of Commercial Banks By late June, stock prices were down percent from a year ago. Bank stocks were down percent from a year ago. Stock Market Performance in and (Mid-July =) NEPSE Index NEPSE index, commercial banks Bombay Stock Exchange (SENSEX index) Source: NRB Sources: i authorities; and IMF staff estimates

4 Lao P.D.R. Figure. and its Peers: Growth, Exports, FDI, Remittances and Human Development s growth has lagged peers and per capita GDP remains lower than in other Asian countries. Per Capita GDP (PPP) (In current international dollars),,,,,, Source: World Bank, WDI Database. Inflows of foreign direct investment (FDI) in remain small. As a result, the stock of FDI is much smaller than in peer countries. Mongolia Lao P.D.R. Myanmar FDI Stocks in (US$ per capita),,, Source: UNCTAD data Poverty declined to percent of the population in /, thanks in part to the growth of remittances. Poverty is higher in rural and mountainous areas. Philippines Poverty rate, /-/ (In percent of the population) Indonesia China National Urban Rural Mountainous s exports have been growing slower than GDP and are lower than in most peers. Exports of Goods and Services - average - average On the other hand, compared to other countries, has high remittances. The decline in poverty is reflected in an improvement in s UNDP Human Development Index. China Sources: IMF, World Economic Outlook; and IMF staff estimates. Inflows of Remittances, Selected Countries, Sources: World Bank, Remittances Data; IMF, World Economic Outlook. Note: Observation for is for /. Human Development Index (HDI) (Index number) HDI, Average HDI (-) LIC median / / / Source: Central Bureau of Statistics. Source: UNDP, Human Development Report.

5 May- May- May- May- May- May- - Bank Deposits, Credit and Remittances (year-on-year change, in percent) / credit crunch Bank deposits Remittances (annual average growth) Credit to private sector - Sources: i Authorities, IMF staff calculations.