CORONAVIRUS Economic Cost

Asian Development Bank has predicted that the escalation of coronavirus will be likely to shake the Nepali economy

March 15, 2020, 1:09 p.m. Published in Magazine Issue: VOL. 13 No. 14,Mar.13-April.02,2020(Falgun.30, 2076) Publisher: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

At a time when various sectors of Nepal have been announcing their growing financial difficulties, Asian Development Bank (ADB) has predicted that Nepal will have to bear $36.78 million dollar loss to the global outbreak of coronavirus – with 15,880 job cuts depending on how the virus evolves.

According to the ADB analysis, the novel coronavirus (COVID-19) outbreak will hit almost every sector of the Nepali economy, shaving up to 0.13 per cent off the gross domestic product.

ADB has explored a range of scenarios on the economic impact of COVID-19 as the outbreak is still evolving, making it difficult to make rational predictions.

If the outbreak’s impact is minimum on Nepali economy, the country’s GDP will shrink by 0.04 per cent or $12.12 million, considering the size of Nepal’s economy as of 2018 at $29 billion. Similarly, Nepal’s GDP will shrink by 0.06 per cent or $18.35 million if the impact of the outbreak is moderate, as per ADB. However, ADB has stated that the COVID-19, in the worst case, could shave off up to 0.13 per cent or $36.78 million from the country’s economy.

“However, the magnitude of the economic impact will depend on how the outbreak evolves, which remains highly uncertain. The COVID-19 outbreak affects Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects,” reads ADB report.

ADB has stated that the COVID-19 will affect various sectors, including hotels and restaurants, manufacturing, construction, transport, trade and business, among others, in Nepal and the Asian region.

ADB forecasts that the virus will primarily affect the hotel and restaurant sector in Nepal. ADB has analyzed that the COVID-19 can shrink Nepal’s hotel and restaurant sector by 0.03 per cent or $8 million to 0.08 per cent or $24.07 million, depending on how the outbreak evolves.

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“Tourism arrivals and receipts in many developing Asian economies are expected to decline sharply as a result of numerous travel bans as well as precautionary behavior,” states ADB.

With the coronavirus outbreak hitting almost every sector in Nepal, it can lead to cut down of 5,210 to 15,880 jobs in the country, depending on how the epidemic develops.

Meanwhile, the range of scenarios explored by ADB suggests a global impact of $77 billion to $347 billion or 0.1 per cent to 0.4 per cent of global GDP, with a moderate case estimate of $156 billion or 0.2 per cent of the global economy.

“There are many uncertainties about COVID-19, including its economic impact. This requires the use of multiple scenarios to provide a clearer picture of potential losses,” said ADB Chief Economist Yasuyuki Sawada.

Bijaya Lama, a handicraft shop owner of Jyatha, has not sold any product for the last two weeks. Opening early in the morning and waiting till 7 PM in hopes to sell some goods, Lama, however, returns home with empty hands.

“If things go like this for another month, I will be unable to pay the rent of the house. I will not have other options than to shut down the shop,” said Lama. The story of all the businesses, restaurants, enterprises, hotels, shop owners, travel agencies and tourism entrepreneurs is the same.

Over fifty percent of hotel, travel agency, shop and restaurant businesses have already shut down and some restaurants are opening with limited products. The restaurants are facing scarcity of essential products due to the same having been collected by people for hoarding.

Regarded as one of the best restaurants in Thamel, Rosemary Kitchen & Coffee Shop now has a handful of tourists. Another top restaurant Gyoung Bok Gung has not had the business of five digits for the last one week.

With the arrival of tourists declining drastically in the last one month, the occupancy of hotels and domestic airlines has reduced. All the tourist areas have turned into ghost towns.

As the flow of passengers declines, the Airline Operators Association of Nepal (AOAN) has decided to ground their aircraft. Domestic airline operators are preparing to ground their aircraft as the number of passengers has declined due to the fear of the novel coronavirus (COVID-19).

Holding a meeting, the Airline Operators Association of Nepal (AOAN) has decided to ground their aircraft due to lack of passengers.

“Since the number of foreign passengers in the domestic sector has declined by 50 per cent over the last two months and there is no possibility to return to normalcy, we don’t have any option other than to cut the flights,” said AOAN Spokesperson Yog Raj Kandel.

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Kandel said that foreign passengers helped us to subsidize Nepalis, the decline in the arrivals of foreigners will badly hit “our revenue. The number of domestic passengers too has fallen in the last two months.”

According to official estimate of AOAN, the domestic aviation sector is likely to face a loss worth Rs four billion in this fiscal year.

As the threat of the coronavirus outbreak exceeds, the number of tourists arriving in Nepal has drastically reduced. Pre-bookings for spring season have also been cancelled. As China, Hong Kong, South Korea, Singapore, Thailand and India are some of the transit countries to reach Nepal, people are avoiding the visit.”

“Although China, Hong Kong, Korea, Singapore and Thailand have checked the infection level, travelers are yet to be confident, they are rather avoiding trips to Nepal,” said Kandel.

According to AOAN, the airline operators have also decided to ask redundant employees to go on leave without pay as distributing salaries has become difficult for the airline companies. They will also cut other facilities given to staffers,” said the press statement issued by AOAN.

The AOAN has requested the government to reduce the investment cost of the airline companies by reducing value added tax on spare parts and aviation turbine fuel (ATF). Likewise, the association has said that the price of ATF should be reduced by 30 per cent. The airline operators have also urged the government to coordinate with Nepal Rastra Bank to refinance interest rates of their bank loans.

AOAN has asked the government to waive interests for the time being so that the amount can be used for other necessary works. The airline operators have also sought 100 per cent discount on airport service charges for the whole of 2020. The airport service charges include aircraft landing, parking, navigation and security fees at the airport.

With the uncertainty growing, Nepal is likely to face a much worse economic setback. Given the current situation, it is unlikely to see the coronavirus scare go away anytime soon.

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