Global Economic Crisis and Nepalese Economy

The world economy now suffers from great crisis. A large number of US and European financial institutions have failed. The first expression of this crisis was seen in the failure of US financial institutions in September 2008, which soon evolved into a global crisis affecting the European countries to a great measure. This has led to a serious unemployment problem, inter alia. Though Nepal has not experienced the impact of this global crisis yet, it will not remain unaffected by it. Economists say that though Nepal is unlikely to suffer from this crisis in the immediate future, if it continues to exist, it will definitely have an adverse effect on the Nepalese economy.

The influx of remittances into Nepal from different parts of the world and its contribution to Nepalese economy gives rises to one of the linkages between the global economy and Nepalese economy. A large number of Nepali people are currently working in different parts of the world. Most of them are working in the Gulf countries. Their number is around one million. Though in Nepal, the amount of remittances has not surpassed the amount of foreign aid like in most of the developing countries, their amount is big enough to contribute to Nepalese economy to some measure.

The global economic crisis is more likely to affect the Nepalese economy by bringing down the amount of remittances. The remittance occupies great importance in developing the economy. Economists observe that every dollar remitted will generate economic activities worth 3$ in the receiving country. Around 90 percent of those Nepalese who are employed in different countries are working in construction sector in the Gulf countries where the effect of the global economic recession has already been seen. This has taken the form of the reduction of the workforce, among others. It is obvious that as this kind of effect deepens even further, there will be a heavy downsizing of the workforce. It is very hard to believe that Nepali workers will remain unaffected by this heavy downsizing. This means the decrease in the amount of remittances Nepal receives now. This, in turn, will have a serious repercussion on the Nepalese economy.