Nepal’s economy is anticipated to grow at 6.2% in fiscal year (FY) 2019 and 6.3% in FY2020. Inflation is projected to rise to 4.4% in FY2019 from 4.2% in FY2018.
 
This edition of Macroeconomic Update’s Issue Focus sheds light on the current state and prospects of Nepal’s services trade and suggests sector-specific policy recommendations. Landlocked-ness and mountainous terrain have historically impeded the promotion of merchandise trade in Nepal. Lack of competitiveness has further held back merchandise exports. Consequently, Nepal’s merchandise trade deficit as a share of GDP has substantially ballooned over the years. Growth in services export, on the other hand, has been better than the growth in merchandise export. The services sector accounted for 66.0% of total exports and 13.0% of total imports in FY2018, indicating its growing importance in external trade. But because of infrastructural, institutional, legal and procedural barriers, the services trade in Nepal has yet to achieve its full potential.