The global COVID-19 (Coronavirus)pandemic imposed both a supply and a demand shock on Nepal’seconomy, which adversely affected growth. The global crisisinduced by the pandemic initially impacted Nepal through thetourism sector, with arrivals from China dropping by around70 percent in February and a full stop to the issuance ofvisitor visas taking effect in early March 2020, which haseffectively dropped tourist arrivals to zero. The impacts ofthe pandemic did not remain limited to tourism. On March 21,the Government of Nepal announced a nationwide lockdown,which affected industrial and agricultural production,leading, for instance, to more than a 25 percentage pointdecline in capacity utilization of industry by early June2020 and a 64.7 percent (y/y) drop in credit provision tothe private sector during the two-month lockdown period.Demand for consumption and production products, such asdiesel and petrol, slowed, with many Nepalese experiencingjob losses or the inability to outmigrate due to widespreadtravel restrictions. A domestic outbreak of COVID-19commenced in May, prolonging the lockdown and imposingsubstantial human and further economic costs. As a result ofthe impact of COVID-19, GDP growth in Nepal is estimated at1.8 percent in FY2020, compared to 7 percent in FY2019.Growth in the service sector is now estimated at 1 percent,the lowest since FY2002, while growth in the industrialsector is estimated at 3.2 percent, a four-year low, due tothe deceleration in overall growth.
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