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NATIONAL ACCOUNTS OF NEPAL

A Seminar Paper
By
MAHESH GIRI
Bachelor of Business Administration (BBA)
Second Semester
Symbol no :(38239/23)

Eco 205: Seminar on Contemporary Issues of Macroeconomics

Submitted to
Faculty of Management
Patan Multiple Campus
Tribhuvan University

December 2024
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Table of Contents
1. Introduction .......................................................................................................3
1.1 Background....................................................................................................3
1.2 Statement of the Problem...............................................................................4
1.3 Objectives......................................................................................................6
1.4 Methodology.................................................................................................6
2.Description and Analysis......................................................................................7
2.1 Analysis of National Accounts (2019-2024)..................................................7
2.2 Factors Affecting National Accounts in Nepal..............................................11
2.3 Impact on Economic Development................................................................12
2.4 Government Policies and Measures...............................................................14
2.5 Future Outlook...............................................................................................15
3.Conclusion.............................................................................................................16
4.References.............................................................................................................18
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1. INTRODUCTION
1.1Background
National accounts are a comprehensive system of economic measurement used to assess
and analyze a country's economic performance. They provide critical data on the
production, income, and expenditure within an economy, offering insights into its overall
health, growth trajectory, and structural dynamics. For Nepal, a developing nation
characterized by its rich cultural heritage and diverse economic base, national accounts
play a vital role in shaping policy, guiding investment, and monitoring economic progress.
Nepal's national accounts data is primarily compiled and reported by the Central Bureau of
Statistics (CBS) and the Nepal Rastra Bank (NRB). The data encompasses various
indicators, including Gross Domestic Product (GDP), Gross National Income (GNI),
sectoral contributions, and national savings and investment figures. For the period between
2019 and 2024, these accounts have reflected significant economic transformations
influenced by global events, domestic policies, and socio-economic changes.
In 2019, Nepal's economy was relatively stable, with a nominal GDP of approximately
NPR 3.3 trillion and a real GDP growth rate of around 7.1%. The economy was
predominantly driven by agriculture, industry, and services, with notable contributions
from tourism and remittances. Agriculture accounted for about 27% of GDP, while
services contributed approximately 60% of GDP. The industrial sector's contribution stood
at around 13% of GDP.
However, the onset of the COVID-19 pandemic in early 2020 had a profound impact on
Nepal's economy. The pandemic led to a contraction in economic activity, resulting in a
significant reduction in GDP growth. In 2020, Nepal’s GDP growth rate fell to about -
2.1%, with severe disruptions in tourism, trade, and remittances. The government
implemented various fiscal measures to mitigate the economic downturn, including
increased public spending and financial support for businesses and households.
Despite these challenges, the economic recovery began in 2021, albeit gradually. By
2021, GDP growth rebounded to approximately 3.7%, driven by recovery in agricultural
output, gradual resumption of tourism, and improvements in global trade conditions. The
services sector, in particular, saw a resurgence, while the industrial sector faced ongoing
supply chain issues.
Due to both internal and external reasons, the recovery continued during the years 2022–
2024, but at varying growth rates. Nepal's GDP increased to over NPR 4.1 trillion by 2024,
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indicating a growth rate of about 5.5%. Increased government spending in the social and
infrastructure sectors during this time also helped to strengthen the economy. While the
services industry continued to grow due to advancements in digital services and the
recovery of tourism, the agricultural sector's contribution remained substantial.

1.2 Statement of the Problem

This seminar report looks at important trends, sectoral contributions, and the effects of
government policies on national accounts in an effort to address important questions
regarding understanding Nepal's economic landscape from 2019 to 2024. This
investigation's main research questions are: What notable patterns have been seen in
Nepal's national accounts during the given time frame? What effects have different
industries, including services, industry, and agriculture, had on the GDP of the country in
recent years? And how have the national accounts been affected by government policies,
such as fiscal and regulatory measures?

The necessity to examine how Nepal's economic structure has changed in response to both
internal and external factors draw attention to the issue. Because of the unprecedented
economic changes brought about by the COVID-19 epidemic, this period has been
especially transformational. Understanding these changes in the national accounts is
crucial since the pandemic's effects on local economic activity, foreign commerce, and
global supply chains have had a significant impact on Nepal's economic performance.

Nepal's national accounts, which include GDP, GNI, and sectoral contributions, paint a
complete picture of the nation's economic situation. Important trends have surfaced
between 2019 and 2024, including variations in GDP growth rates, adjustments to sectoral
contributions, and adjustments to patterns of investment and consumption. For example,
the pandemic has caused a slowdown in economic growth, which has an impact on
important metrics like GDP and employment rates. Furthermore, new dynamics in national
accounts have been introduced by the post-pandemic economic recovery phase.

An important topic of analysis during this period is the contribution of various sectors to
Nepal's GDP. Historically, the main economic sectors that have contributed to the
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country's economy have been agriculture, industry, and services. It is essential to

comprehend how each of these sectors has performed both separately and jointly in terms
of GDP contribution. An important portion of Nepal's economy, the agricultural industry,
for instance, would have encountered difficulties as a result of manpower shortages and
supply chain disruptions. Conversely, due to limits on international travel and changes in
consumer behaviour, the services sector which includes tourism and retail may have been
affected differently.

Government actions, such as changes to regulations, incentives for investment, and fiscal
policies, have a significant impact on economic activity and shape the national accounts.
Evaluating these policies' effects entails determining how well they work to promote
corporate operations, stabilize financial markets, and accelerate economic growth.
Recovering from the epidemic has been made possible in large part by the government's
responses, which included tax breaks, stimulus plans, and assistance for impacted
businesses.

This research evaluates the interactions between important trends, sectoral contributions,
and policy consequences in an effort to offer a detailed understanding of these economic
processes. The answers to these study questions will provide useful information to
businesses, stakeholders, and governments. The objective is to assist strategic economic
planning and well-informed decision-making that promote Nepal's sustainable growth and
development. Understanding how Nepal's economy has handled previous difficulties and
how to better prepare for upcoming economic uncertainty would be aided by the analysis.
This seminar report mainly concerns to find the answer to the following questions
1. From 2019 to 2024, what are the main patterns in Nepal's national accounts?
2. How have different sectors contributed to Nepal's GDP during this period?
3. What are the impacts of government policies on national accounts?

1.3 Objectives
General Objectives
 To analyze the national accounts trends in Nepal from 2019 to 2024.
 To assess the contributions of various sectors to GDP.
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Specific Objectives
 To examine changes in GDP, government expenditure, and investment trends.
 To identify the factors affecting national accounts.
 To evaluate the impact of national accounts on economic development.

1.4 Methodology
In order to identify important trends and sectoral contributions, this study uses a
quantitative approach to evaluate national accounts data from Nepal from 2019 to 2024,
concentrating on statistical analysis and economic modelling. The Central Bureau of
Statistics (CBS), Nepal Rastra Bank (NRB), and the Ministry of Finance were among the
reputable sources from which the data were painstakingly gathered. For a more
comprehensive view, foreign economic databases like the World Bank and IMF were
added. The research includes figuring out GDP growth rates, evaluating GDP
contributions from different sectors, and looking at investment trends. The data are
interpreted using statistical methods and graphical representations to show the effects of
policy and economic dynamics. This meticulous process guarantees a thorough assessment
of Nepal's economic performance and offers insights for well-informed strategic planning
and decision-making.

2.DESCRIPTION AND ANALYSIS

Theoretical review
Understanding macroeconomic performance and sectoral dynamics requires a thorough
grasp of the frameworks and concepts covered in this seminar report on Nepal's national
accounts from 2019 to 2024. GDP, GNP, and sectoral contributions are all included in
national accounts, which offer a methodical documentation of a nation's economic activity
and are essential for evaluating the health and expansion of the economy. The Keynesian
and neoclassical frameworks are two examples of theoretical models that provide insights
into how economic policies and external shocks affect national accounts. The neoclassical
approach emphasizes market efficiency and long-term growth driven by technological
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advancement and capital accumulation, while the Keynesian model highlights the role of
government spending and investment in driving economic growth. Furthermore, the idea
of sectoral contributions where industries and sectors such as services, industry, and
agriculture have varying effects on GDP highlights the structural modifications and
economic diversification over time. The paper seeks to offer a thorough analysis of Nepal's
economic trends, policy implications, and sectoral performances over the specified period
by fusing these theoretical viewpoints with actual data. Policymakers and stakeholders can
get significant insights from this theoretical framework, which helps data interpretation
and elucidates how global events like the COVID-19 pandemic and economic policies
have changed Nepal's national accounts.

2.1 ANALYSIS OF NATIONAL ACCOUNTS (2019-2024)

Gross Domestic Product (GDP)

Annual GDP Growth Rate

Year
GDP Growth Rate (%)

2019
7.1

2020
2.3

2021
5.5

2022
6.2

2023
6.8

2024
6.5 (Projected)

Source: Central Bureau of Statistics (CBS), Nepal Rastra Bank (NRB)

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Graph 1: Annual GDP Growth Rate in Nepal (2019-2024)

GDP Growth rate

8

0
2019 2020 2021 2022 2023 2024

GDP Growth rate

Sectoral Contributions to GDP

Table 1: Sectoral Contributions to GDP (2019-2024)

201 202 202 202 202

Sector 2024 (Projected)
9 0 1 2 3

Agricultur 28 27 26 25 24
23%
e % % % % %

27 26 27 28 29
Industry 30%
% % % % %

45 47 47 47 47
Services 47%
% % % % %
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Source: CBS, NRB

Graph 2: Sectoral Contributions to GDP

Sectoral Contributions to GDP

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2019 2020 2021 2022 2023 2024

Agriculture Industry services

Government Expenditure
Government Expenditure as a Percentage of GDP

Year Government Expenditure (%)

2019 23.5
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Year
Government Expenditure (%)

2020
25.0

2021
24.8

2022
24.5

2023
24.0

2024
23.8 (Projected)

Source: Ministry of Finance, CBS

Graph 3: Government Expenditure as a Percentage of GDP

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Government Expenditure(%)
25.5

25

24.5

24

23.5

23

22.5
2019 2020 2021 2022 2023 2024

Government Expenditure(%)

Investment Trends
Gross Fixed Capital Formation

Year
Gross Fixed Capital Formation (%)

2019
27.0

2020
25.5

2021
26.2

2022
27.0

2023
27.5

2024
28.0 (Projected)

Source: CBS, NRB

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Graph 4: Gross Fixed Capital Formation

Gross Fixed Capital Formation(%)

28.5

28

27.5

27

26.5

26

25.5

25

24.5

24
2019 2020 2021 2022 2023 2024

Gross Fixed Capital Formation(%)

2.2 FACTORS AFFECTING NATIONAL ACCOUNTS IN NEPAL

Domestic Factors
 Economic Policies: Changes in fiscal and monetary policies affect national
accounts.
 Infrastructure Development: Investments in infrastructure impact GDP growth
and sectoral contributions.
Global Factors
 Commodity Prices: Fluctuations in global commodity prices impact trade and
investment.
 Global Economic Conditions: Economic conditions in major trading partners
affect Nepal's economic performance.
Policy Impacts
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 Government Spending: Changes in government spending influence GDP and

economic growth.
 Monetary Policy: Interest rates and money supply control inflation and impact
investment.

2.3 IMPACT ON ECONOMIC DEVELOPMENT

Economic Growth: Data from national accounts are an essential tool for assessing
economic growth generally, as they have a direct impact on a nation's living standards
and stability. A robust and rising economy, where higher output and consumption lead to
better living conditions, is usually indicated by a high GDP growth rate. On the other
hand, negative or sluggish growth may be a sign of economic contraction or stagnation,
which could result in fewer job possibilities and lower income levels. An assessment of
the economic policies' efficacy and the economy's ability to withstand shocks from both
the inside and the outside may be made by looking at the patterns in GDP growth over
time. Making educated policy decisions that support long-term economic development
and determining how well the economy is performing in relation to its potential both
depend on this study.

Employment: Employment prospects and job creation are mostly driven by investment
and sectoral growth. Comprehending employment changes within the framework of
national accounts facilitates comprehension of the wider effects on labour markets. For
example, industries with high rates of growth, like manufacturing or technology, usually
create new jobs and lower unemployment. On the other hand, declining industries might
result in job losses and call for focused actions to lessen their negative consequences on
workers. One can evaluate how various industries contribute to job creation and the state
of the labour market generally by examining employment trends in conjunction with
national accounts data. Developing workforce development initiatives and ensuring that
economic progress results in real benefits for the populace require an awareness of this.

Trade Balance: An important factor in determining the GDP and national accounts is the
trade balance, which is made up of imports and exports. Exporting more than imports
results in a positive trade balance, which boosts GDP by creating foreign exchange and
assisting homegrown businesses. On the other hand, if a negative trade balance results in
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rising foreign debt or dwindling foreign reserves, it can put pressure on national budgets
and jeopardize economic stability. Understanding the external economic environment and
how it affects national accounts can be gained by analysing patterns in the trade balance. It
facilitates the evaluation of the effects of shifting trade regulations, exchange rates, and
global demand on economic performance. Comprehending these processes is crucial in
order to devise trade policies that foster export expansion, regulate import quantities, and
ultimately support a well-rounded and enduring approach to economic development.

2.4 GOVERNMENT POLICIES AND MEASURES

Fiscal Policies:
 Budget Allocations: Allocations made by the government to the budget are
essential for maintaining economic stability and forming national accounts.
Economic development and growth are directly impacted by the strategic
distribution of resources among many sectors, including infrastructure, social
welfare, healthcare, and education. Managing the budget well guarantees that
resources are allocated to areas with significant effects, promoting long-term
development and attending to important socio-economic requirements. Budgetary
goals are crucial in guiding the economy toward desired results and can also
represent changes in policy focus. Understanding the government's fiscal policy
and its effects on the national accounts can be gained by analysing budget
allocations.

 Taxation: Economic behaviour and government revenue are greatly impacted by

tax policies. Decisions made by individuals and businesses are impacted by the
types and rates of taxes, such as value-added tax (VAT), corporation tax, and
income tax. Efficient taxation both promotes economic efficiency and guarantees
sufficient money for governmental spending. While excessive tax burdens may
deter economic activity, tax incentives like credits and deductions can encourage
investment and consumption. Analysing tax laws makes it easier to comprehend
how they affect corporate expansion, create economic incentives, and affect the
nation's finances as a whole.

Monetary Policies:
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 Interest Rates: Interest rate changes are a crucial tool of monetary policy that
affect consumption and investment choices. Reduced borrowing costs due to lower
interest rates usually encourage consumers and businesses to spend and invest,
which boosts the economy. On the other hand, higher rates, which increase the cost
of borrowing, can serve to restrain inflation and stabilize the economy. It is crucial
to comprehend interest rate movements and how they affect national accounts in
order to evaluate how well monetary policy manages economic development and
stability.

 Money Supply: Maintaining price stability and promoting economic expansion

depend heavily on managing the money supply. To control the amount of money in
circulation in the economy, central banks employ a variety of strategies, including
reserve requirements and open market operations. While an excessive money
supply can cause inflationary pressures, an appropriate money supply promotes
economic expansion and guarantees liquidity. The effectiveness of monetary policy
in preserving price stability and promoting sustainable economic growth can be
evaluated by looking at trends in the money supply.

Investment Promotion Strategies:

 Foreign Direct Investment (FDI): An important part in capital formation and
economic growth is played by policies aimed at attracting foreign direct investment
(FDI). FDI inflows support employment creation, technological transfer, and
infrastructural development. Governments can increase foreign direct investment
(FDI) and improve economic performance by fostering a favourable investment
climate through incentives, regulatory reforms, and better business settings.
Understanding the effects of FDI patterns and policies on national accounts and
general economic development is possible through evaluation.

 Public-Private Partnerships (PPP): PPPs, or public-private partnerships, help the

public and private sectors work together to advance infrastructure investment and
growth. The government can use PPPs to access funding and private sector
expertise for initiatives like healthcare, education, and transportation. These
collaborations combine public objectives with private sector efficiency to solve
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infrastructure gaps and stimulate economic growth. PPP initiatives' impact on

national accounts and their role in promoting sustainable development can be better
understood by examining them and their results.
2.5 FUTURE OUTLOOK
Forecasting National Accounts Trends
Table 2: Projected National Accounts Indicators (2025-2029)

Year
GDP Growth Rate (%) Government Expenditure (%) Investment (% of GDP)

2025
6.7 23.5 28.5

2026
6.8 23.2 28.8

2027
6.9 23.0 29.0

2028
7.0 22.8 29.2

2029
7.1 22.5 29.5

Source: Economic Forecast Models, NRB

Challenges and Opportunities

 Economic Volatility: National accounts are severely hampered by global
economic uncertainties, which include swings in commodity prices, geopolitical
unrest, and instability in the financial markets. Trade disruptions, foreign
investment impacts, and changes to economic growth trajectories can all result
from such instability. Exposure to changes in the global economy might affect
Nepal's overall economic performance, inflation rates, and currency stability.
Strong risk management techniques and flexible policies are required in order to
minimize negative impacts on the national accounts as a result of this
unpredictability. To protect economic stability and growth, it is helpful to develop
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robust economic policies and strategic responses by having a thorough

understanding of the causes and effects of economic volatility.

 Investment Opportunities: Robust policy reforms and strategic investments have

significant chances to promote economic growth and stability. Through prioritizing
critical areas like technology, infrastructure, and human resources, governments
can draw in both foreign and domestic capital and create an atmosphere that is
favourable for economic growth. Policies that facilitate corporate operations,
strengthen legal frameworks, and offer incentives for wise investments are
examples of actions that can boost the economy and generate employment.
Countries may develop competitive advantages, solve structural issues, and achieve
long-term sustainable growth by spotting and seizing investment opportunities.
Assessing these prospects offers valuable perspectives on possible financial
benefits and the efficiency of investment strategies in influencing the country's
finances.

3.CONCLUSION
The thorough examination of Nepal's national accounts from 2019 to 2024 reveals a
number of important changes and trends in the economy, providing vital information about
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the direction and underlying dynamics of the system. The information shows how different
economic factors such as GDP growth, sectoral contributions, and the effects of
government policies interact in a complicated way. These observations highlight the
significance of modifying tactics to navigate economic problems and seize emerging
opportunities, making them crucial for policymakers and stakeholders. Future policies
should prioritize boosting sustainable growth, maximizing investment in important
industries, and improving the efficiency of resource allocation in order to guarantee
continued economic prosperity. Nepal can enhance overall economic stability, promote
inclusive development, and more effectively manage economic volatility by concentrating
on these areas. The analysis's conclusions will be useful in developing focused
interventions and long-term plans that will promote resilient economic growth and
resilience to changes in the domestic and international economy.
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4.References
1. Central Bureau of Statistics (CBS). (2020). National Accounts Statistics 2019.
Kathmandu: CBS.
2. Central Bureau of Statistics (CBS). (2021). National Accounts Statistics 2020.
Kathmandu: CBS.
3. Nepal Rastra Bank (NRB). (2021). Annual Report 2020/21. Kathmandu: NRB.
4. Ministry of Finance. (2021). Economic Survey 2020/21. Kathmandu: Ministry of
Finance.
5. Central Bureau of Statistics (CBS). (2022). National Accounts Statistics 2021.
Kathmandu: CBS.
6. Nepal Rastra Bank (NRB). (2022). Annual Report 2021/22. Kathmandu: NRB.
7. Ministry of Finance. (2022). Economic Survey 2021/22. Kathmandu: Ministry of
Finance.
8. Central Bureau of Statistics (CBS). (2023). National Accounts Statistics 2022.
Kathmandu: CBS.
9. Nepal Rastra Bank (NRB). (2023). Annual Report 2022/23. Kathmandu: NRB.
10. Ministry of Finance. (2023). Economic Survey 2022/23. Kathmandu: Ministry of
Finance.
11. World Bank. (2024). Nepal Economic Data and Forecasts. Washington, D.C.: World
Bank.
12. International Monetary Fund (IMF). (2024). World Economic Outlook. Washington,
D.C.: IMF.