1

Nepal's Macro economy status during covid-19

A seminar paper

By

SURAJ PATEL

Bachelor of Business Administration (BBA)

second semester

symbol No:

31525/21

Macroeconomics

Submitted to Faculty of

management

THAKUR RAM MULTIPLE CAMPUS

on
FEB 22 2023
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Acknowledgements

I would like to express my sincere gratitude to all the people who helped me to
prepare this seminar paper. I would not be able to prepare this seminar paper without those
people from whom I got ideas , support and guidance.

My first debt of gratitude goes to our respected Lecturer as well as guider Mr. Indushekar
Mishra who helped us a lot by providing suggestions and technique for the final manual of
this paper. I feel proud of being his student .I would like to acknowledge all the respondents
who shared their experience and provided necessary data for the research.

I would like to express my deep gratefulness to the family members who have been always
motivating , inspiring and facilitating me to do well. Finally , I also want to express my
gratefulness to all those scholars whose published and unpublished materials have been used
while conducting this task.
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DECLARATION
I hereby declare that the seminar paper entitled "Nepal's Macro economy status
during covid-19" is an outcome of my own effort expect where due to reference is made
under the guidance of Mr. Indushekar Mishra, Professor of Macroeconomics at the
faculty of management, Thakur Ram Multiple Campus . This project is submitted to the
Tribhuvan university(TU) for the partial fulfillment of the BBA course.

I also declare that this seminar paper has not been previously submitted by any other else.
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Table of Contents
ABSTRACT: 5
INTRODUCTION 6
Background of the study 6
Statement of problem 7
Objective: 7
DESCRIPTION AND ANALYSIS 8
Literature Review: 8
Theoretical Review: 8
Empirical Review: 8
Conceptual Framework 10
Analysis of data and Interpretation: 11
Data and Methodology 14
RESULT AND CONCLUSION 14
REFERENCES 15
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ABSTRACT:

This study assess the covid-19 and it's impact on macro economy variables in Nepalese
economy based on secondary data sets of Macro Economic. The worldwide pandemic of
COVID-19 has caused human losses and severely affected the global economy and passing
in a turmoil situation. The COVID 19 pandemic is having a significant economic as well as
health impact in Nepal. The economy of Nepal is also grappled by the severe public health
crisis of the Covid19. As the public health emergency is heavily interconnected with
economic affairs, it has impacted each of the pillars of the economy. Similarly ,it's shocks
were so strong to influence trend, pattern and structure of Macro Economic variables. This
article focuses on COVID19 impact on economic growth in Nepal. The main purpose of this
paper is to make evaluations of the potential impact of the COVID-19 pandemic on the
economy of Nepal has resulted in historically the highest agriculture, remittance
unemployment, Tourism sector , Education and biggest fall in GDP. Thus , COVID-19 and
it's shocks were undesirable fluctuations and imposed implications in Nepalese economy.
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INTRODUCTION

Background of the study:

In Late December 2019 a new (novel) coronavirus was identified in china causing severe
respiratory disease including Pneumonia . It was originally named Novel Corona virus and
The world health organization (WHO) advised the following language associated with the
virus:

● The virus causing the infection has been named- severe acute respiratory
syndrome coronavirus 2 (SARS-COV-2).
● The disease caused as the result of infection is named- corona virus disease ( COVID-
19).COVID-19 has been categorized as an airborne high consequence infection
Disease.

COVID-19 the first case was identified in Wuhan, China in December 2019. The disease
has since spread worldwide, leading to an ongoing pandemic. The World has been gripped
by a pandemic over the first half of 2020. It was identified as a new coronavirus (severe
acute respiratory syndrome coronavirus 2, or SARS-CoV-2), and later named as
Coronavirus Disease-19 or COVID-19 (Qiu et al., 2020). While COVID-19 originated in the
city of Wuhan, it has spread rapidly across the world, resulting in a human tragedy and
tremendous economic damage.

The coronavirus disease (COVID-19) has critically impacted global health systems and
economies, especially in developing countries. Those countries have been struggling to
address the pre-existing burden of diseases with limited resources, which had became even
more challenging during COVID-19. The economic implications related to COVID19 in
those countries include a high cost of care, market failures in pluralistic health systems,
high out-of-pocket expenses, the added burden of non-communicable diseases, missed
economic opportunities and socio economic consequences like unemployment and poverty
(Rodela et al., 2020) .The COVID-19 pandemic is resulting in a major global recession
(World Bank, 2020b).

The first COVID-19 case was confirmed in Nepal on 23 January 2020 when a 31-year-old
student, who had returned to Kathmandu from Wuhan on 9 January, tested positive for the
disease (Wikipedia). It has spread rapidly across the world, resulting in a human tragedy and
tremendous economic damage. Nepal’s economy is projected to grow by only 0.6 percent in
2021, inching up from an estimated 0.2 percent in 2020 as lockdowns caused by COVID-19
disrupt economic activity, due to increasing unemployment resulting from the nationwide
lockdown (World Bank, 2020). The COVID 19 pandemic has shaken the entire world. It has
infected over 106.797721million people in more than 223 countries, areas or territories, the
death toll reached 2.341145 million. Nepal it has infected over 2 lakhs 72 thousand 4 hundred
30 and death toll reached 2 thousand 52, by 11 February 2021 and continues to rise (WHO,
2021).Thus , covid-19 had been a great threat to the health of the population of the world.
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Statement of problem:
COVID-19 became an undesired big exogenous issue to the world from the beginning of the
year 2021. Its growth and version dynamics have made unaccountable disastrous shock
directly to the health and livelihood of human being but also indirectly to the global
economic system and household economy of the world. Pandemic like covid-19 may occur in
future life too. So ,the developing countries like Nepal should be prepared for tackling such
situations .And also should improve health care system and prepare backup plans for the
future uncertainty.

COVID-19 was rapid transmittable infectious respiratory diseases having three levels: a)
infected, b) recovery and c) non-recovery death. Its transmittable capacity that is invisible
with higher than SARs and HIV/ AIDs is either local or imported. Its major cause is
mentioned to social integration and contacts between human being. Therefore, WHO (2020)
had recommended health protocol to control COVID-19 to three things: mask, social
distancing and using sanitizer and also vaccines. The COVID-19 directly affected human
health and Livelihood and indirectly national economy.

In this context, Nepal’s lockdown was exceeded 60 days after adopting the lockdown
preventive measures similar to SAARC countries to slow down the vertical and horizontal
growth of COVID-19’s positive cases and the potential deaths. As the growth of preventive
economic cost increase . Therefore, Nepalese economy had its negative outcomes at macro
and micro economic level including economic growth, employment, sectorial output and
performance, trade and balance of payment (BOP), fiscal deficit, livelihood, poverty etc. If
lock down was extended in future, its undesirable effects would be unexpectedly more.
Therefore, the preventive economic cost of COVID-19 and its implication on Nepalese
economy at macro and micro level were a relevant issue to find out a way forward to save the
economy from COVID-19 induced economic slowdown (recession). Despite its policy
execution and discourse, none of the literatures have focused on this issue. Therefore, this
issue is relevant to this paper to understand COVID-19 scenario and its shocks on macro-
economic variables and implication for future adaptation policy.

Objective:
The general objective of this paper is to assess the covid-19 and it's impact on Macro
economic variables of Nepal. However ,the following are the specific objective of this paper:

● To analysis the structure and status of Macro economy during covid-19.

● To assess covid-19's shocks on the Macro economic variables.
● To identify it's implications on the Macro economic variables.
● To know about how Nepal government handled covid-19.
● To know about how covid -19 became big exogenous issue and pandemic .
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DESCRIPTION AND ANALYSIS

Literature Review:

Theoretical Review:
A literature of the WHO (2020) has noted COVID-19 as rapid transmittable infectious
respiratory diseases having three levels: a) infected, b) recovery and c) non-recovery death.
Its transmittable capacity that is invisible with higher than SARs and HIV/ AIDs is either
local or imported. Its major cause is mentioned to social integration and contacts between
human being. Therefore, WHO (2020) has recommended health protocol to control COVID-
19 to three things: mask, social distancing and using sanitizer and now intake of vaccines.
The covid-19 directly affected the human health and indirectly to the national economy.

Empirical Review:
McKibbin, and Fernando, (2020) examined the impacts of different scenarios on
macroeconomic outcomes and financial markets in a global hybrid Dynamic Stochastic
General Equilibrium/Commutable General Equilibrium model. The study found significant
impact on the global economy in the short run. UN (2020) specified the impact on macro
economy as sharp declines in domestic demand, lower tourism and business travel, trade and
production linkages, supply disruptions, and health effects, along with the magnitude of the
economic impact based on the outbreak length. The study examined the impact of the
ongoing COVID-19 outbreak on China and other developing Asian economies based on
historical time series data and cross-sectional information through the use of descriptive
statistics. Additionally, ADB (2020) and IMF (2020) have similar analysis. This paper
attempts to quantify the potential global economic costs of COVID-19 under different
possible scenarios. The goal is to provide guidance to policy makers to the economic benefits
of globally-coordinated policy responses to tame the virus.

CCSA (2020) assessed how COVID-19 is changing the world: a statistical perspective in the
world with analytical and descriptive tools. In the quantitative assessment, CCSA (2020)
found 40 percent falling global FDI in 2020, 20 percent falling global manufacturing output
in April 2020, 150 million full time job loss, pushing additional 71 to 100 million people into
extreme poverty and unprecedented decline in the HDI and 43 percent decline in remittance
inflow. Thus, the analysis concludes changing the world towards vulnerability and instability
in short runs.

, UN (2020), ADB (2020) and IMF (2020) quantitatively assessed the impact of the COVID-
19 with the prediction of a global impact of $77 billion (0.1%) to $347 billion (0.4%) of
global GDP, with a moderate case estimate of $156 billion or 0.2% of global GDP. Two-
thirds of the impact falls on the China. In addition, it suggested the impact of the COVID-19
on individual developing Asian economies. ADB(2020) quantified two thirds of the global
impact in the moderate scenario the loss to China to a no-outbreak scenario with 103 billion
USD (0.8% of Chinese GDP) meanwhile the rest of developing Asia would experience a loss
of 22 billion USD (0.24% of its GDP) under the moderate scenario.
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IMF (2020) assessed the impact of COVID 19 on the Global Economy, expecting only a
0.1 percentage point (ppt) cut to 3.2%; later, on 4 March, it revised its outlook to a rate
lower than the global growth of 2.9% in 2019, before declaring on 23 March that the global
economy will face a recession. In its assessment report on the impact of the COVID-19
outbreak published in 2 March, the OECD predicted a reduction of 0.5 ppt from the original
forecast of 2.9% global growth for 2020, to 2.4%, or a near halving to 1.5% in case of a
prolonged global outbreak. Additionally, CCSA (2020) has predicted adverse effects of the
COVID-19 pandemic on Asian economy.

Clemente-Suárez, et al. (2021) has considered it as health stressor having direct impact on the
metal health of the population by provoking the public health for flexibility, innovation and
adaptation. This paper attempts to assess psychological and mental impact among vulnerable
populations during the COVID-19 pandemic compared to healthy controls, through which the
priorities of mental health needs can be identified.
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Conceptual Framework:

Problem Identification

objective:

Variable:
Tourism Sector Agriculture Sector

Data and Methodology:

Result and Conclusion

Chart: Conceptual Framework

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Analysis of data and Interpretation:

Impact of covid-19 on Nepalese Economy:

The COVID-19 has already affected whole countries and regions in the world. Economically
developed countries are failed to tackle this pandemic situation. In comparing developed
countries, the developing and poor countries are unable to meet this condition. Nepal is a
least developed country and used isolation and lockdown to stopped the spread of this deadly
virus. Due to lockdown and isolation, the economy of Nepal is seriously affected. Nepal
imposed a lockdown to control the spread of the coronavirus since 24 March 2020 and
partially opened since the first week of September 2020. The lockdown has affected the
overall physical, mental, social and spiritual health of the people and posed unique challenges
with vulnerable populations and limited resources to respond to the pandemic . The economic
impact of COVID-19 covers as under various sectors and mainly I'm focusing on two sectors
i.e Tourism sector and Agriculture Sector.

Agriculture Sector:

Agriculture sector is a major sector of the economy in terms of income, employment and food
security in Nepal. The contribution of agricultural sector (agriculture, forest and fisheries) in
total Gross Domestic Product is estimated to be 27.7 percent in the current fiscal year
2019/20 (Economic Survey 2019/20, MOF). The agricultural crops, livestock and fisheries
are not outside the impact of COVID-19. Being an agricultural country, the travel restriction
and lockdown have affected every stage of the food supply chain, including food production
and distribution in Nepal. Farmers are compelled to dump milk and vegetables after a
significant decrease in supply and closure of processing companies and proper markets
(Poudel et al., 2020).

The implementation of lockdown has affected all sectors in the country including
agriculture. The ability of farmers fully stopped to sell their products in the markets
which affected income and food loosed. The disruption on the agricultural inputs
supply has caused shortages of seeds, fertilizers, veterinary medicines, and feed for
animals. Furthermore, delays in the harvest of wheat and lentils have been reported as
well as delays on land preparation for vegetable production (key high-income crops),
rice and maize. Delayed planting of spring maize and rice (major crops) can have a
long-term effect on the overall agricultural production and livelihoods of farmers.
The loss of jobs and incomes as a result of the lockdown has pushed the vulnerable
population into further food and nutritional insecurity .

Risks to agriculture and food systems

Here are the highlights from the DIME survey:
Cultivation of the main cereal crop fell
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● 5% percent of smallholder farmers reported being unable to plant their main cereal
crop—paddy in Terai and maize or millet in the hills—during the summer of 2021 for
reasons including lack of family labor, availability of land to cultivate, and the
inability to purchase quality seed.
● 47% of large landowners reported that they cultivated less area for the main
cereal crop than in the 2020.This number was lower for smallholder farmers at
31%.

fig: main cereal cultivation in

summer source: DIME survey
Restrictions affected crop planting behavior

● Among the farmers who did cultivate crops, 9% reported making changes to their
crop planting behavior due to COVID-19-related restrictions, including social
distancing, hand washing, and the usage of masks when planting crops.
● Some farmers reported not planting vegetables due to an inability to sell their crops
at the market. They switched back to planting cereals.
● 16% of farmers reported not having sufficient labor to cultivate their land, with most
of the affected farmers attributing this to COVID-19 related movement restrictions.
Some farmers stopped hiring day laborers from neighboring villages, and preferred
to cultivate their plots with family labor or those from their own village to comply
with distancing rule.

Tourism Sector:

The world was facing an unprecedented global health, social and economic emergency with
the covid-19 pandemic .Travel and tourism was among the most affected sectors with
airplanes on the ground, hotels closed and travel restrictions pit in the place in virtually all
countries around the world. According to UNWTO's Report on Covid-19 related travel
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restrictions ,100% of all worldwide detinations have introduced travel restrictions in response
to the pandemic .

To stop the spread of the virus , the government of Nepal took decisive steps suspending
flights , closing schools and offices ,sealing boarder and halting ground transport .Domestic
and international trade has substantially slowed ,supply of goods and services has
plunged.The ADB estimates that the economic loss in service sector ranges from NPR 5.2
billion to NPR 9.98billion .

The tourism and travel sector contributes 8% to Nepal's GDP,6.7% to the country's total
employment and it generates 6% of the total foreign exchange earnings. Reduction in tourist
arrival had badly effect on the tourism sector. The slow down of the economy deteriorate the
employment (UNDP, 2020).According to tourism minister Yogesh Bhattarai (Ratopati, 2020)
and Nepal tourism Board (2020) has estimated the loss of 85.2 billion US$ which is 10
billion NPR monthy from tourism sector only and three in five employees lost their jobs due
to covid-19 in Nepal.The "Visit Nepal 2022" campaign has cancelled which aimed to attract
2 million tourist in the country that year. Tourism sector had suffered a huge loss .

figure: Arrival of Tourist in Nepal

source: MoF, 2020

In the above figure, it shows the arrival of tourist in Nepal in 2020 (during covid-19).
Comparing 2019 and 2020,we can see a huge difference on arrival of tourist. In 2019, there
were 11,97,191 number of tourist arrived in Nepal but as covid-19 was introduced arrival of
tourist in Nepal decline in large number ,only 230,085 tourist were arrived in 2020. This
figure shows that due to covid-19 tourism sector had suffered a huge loss.
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Data and Methodology:

Data sets of covid-19 and Macro economic variables are from secondary sources. The data
sets consist of covid-19 Cases ,Death and recovery cases collected from the daily report of
the WHO. Similarly, GDP Per capita was collected from world Bank (WB) and IMF. Besides
variables data were collected from the economic survey, Ministry of finance ,National
planning commission and statistics of Nepal Rastra Bank(NRB).

Analytical tool of the study is descriptive statistics to describe periodical data sets of covid-19
and Macro Economics variables in pre and post COVID-19 and analyze their statistics with
economic effects and causes for their implication. In the descriptive statistics , the study
analyzes structure and pattern of covid-19 and Macro Economic variables. In the study ,
Excel sheets was applied to compile all data bases of Covid-19 and further processing in the
form of figure and graphs.

RESULT AND CONCLUSION:

This paper analyzes COVID-19 implication in Nepal at macro economy based on secondary
data through descriptive statistics. COVID-19 is an infectious diseases infecting 5.2 million
population and killing 0.4 million population in the world. In Nepal, its total economic cost
was 540 billion NRs and 402 COVID cases having contribution significantly GDP loss of
Nepal. So far concerning macroeconomic variables, such economic cost has negative impacts
on economic growth rate, sectorial economy, remittance, employment and poverty, foreign
currency reserve, tourism sector and Agriculture sector. So, COVID-19’s direct and indirect
cost to Nepal has increased vulnerability at macro and micro level. Thus, total economic cost
may be a big burden and a key driver of macroeconomic instability and poor health of
developing country like Nepal having small economy and imperfect and inefficient public
health system. It is clear that unpredictable and undesired exogenous variables and events in
the world are functional dynamically to counter endogenous variables and events of national
economy of the less developed countries. Its socio-economic and political cost is far beyond
the projection to the less developed countries, like Nepal. Therefore, the less developed
countries should improve resilient capacity and preparedness of national economy and
sector’s capacity to minimize socio-economic effects of such unpredictable and undesired
exogenous variables and events in the cooperation with the international community to save
life of the people and national economy from such economic shocks, losses and cost led
economic recession so that humanitarian and economic crisis could be minimized as possible.
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Coronavirus Disease 2019 (COVID-19) in China (Working Paper 494). GLO Discussion
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Rodela TT, Tasnim S, Mazumder H & Faizah F (2020) Economic Impacts of Coronavirus
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World Bank 2020b. Press Release: COVID-19 to Plunge Global Economy into Worst Recession
since World War II. Washington D.C.

WHO (2021) COVID-19 update – Thursday 11th February 2021. Retrieved

from https://health.gov.tt/covid-19-updatethursday-11th-february-2021

WHO (2020). COVID-19 Update. Switzerland: World Health Organization

Poudel K and Subedi P (2020) Impact of COVID-19 pandemic on socioeconomic and mental
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McKibbin, W. & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: seven
scenarios, Australia: Australian National University and Centre of Excellence in Population
Ageing Research (CEPAR)

ADB (2020). the economic impact of the COVID-19 outbreaks on developing Asia

IMF (2020). Economic impact of COVID-19 outbreaks on the global economy (IMF Brief
April), Washington: IMF

CCSA (2020) How COVID-19 is changing the world: a statistical perspective volume II.
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United Nations (2020). Policy Brief: The impact of COVID-19 on the Asian Economy
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Clemente-Suárez, V.J.; Navarro-Jiménez, E.; Jimenez, M.; Hormeño-Holgado, A.; Martinez-

Gonzalez, M.B.; Benitez-Agudelo, J.C.; Perez-Palencia, N.; LabordeCárdenas, C.C. & Tornero-
Aguilera, J.F. (2021) Impact of COVID-19 pandemic in public mental health: An extensive
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Poudel PB, Poudel MR, Gautam A, Phuyal S, Tiwari CK & Bashyal S (2020) COVID-19 and its
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Ratopati, 2020, https://www.ratopati.com/story/151385/2020/10/15/yogesh-bhattarai

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UNDP, 2020 Three in five employees lost their jobs due to COVID-19 in Nepal.
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