Spiralling conflicts in Nepal since 2001 have resulted in a loss of over 3 percentage point in Gross Domestic Product (GDP) as of 2004, according to an Asian Development Bank (ADB) study reaching Kathmandu Friday.

According to the study of ADB for 2005, conflicts are going to incur a loss in GDP growth by 2 percentage point in 2006, which will go up further if conflicts continue unabated in the country.

The recent decline in GDP growth rate to 2.33 percentage point in 2004-05 from previous fiscal year's 3.54 can also be attributed to a dismal performance of development activities and low investment.

Showing serious concerns on the deteriorating GDP growth, Chandi Raj Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry commented that more than 300 industries, mostly export-oriented ones like garment, hotels and manufacturing have already closed down due to increased conflicts.

This has resulted at a low GDP growth and further loss is also likely, Dhakal saids.

A fall in GDP growth by 1.21 percentage point as per the data of the Central Bureau of Statistics (CBS)of Nepal, the domestic industry will be discouraged and employment problems will increase further.

In accordance with the ADB's study, economic growth slowed to an average of 1.9 percent during 2002-2004 compared to about 5 percent in the decade preceding that period.

Conflict related disruptions such as strikes, security checks, blockades, shutdowns, and extortion have increased the cost of economic activity and contributed to an economic slowdown.

More than 400,000 people from rural families have been internally displaced while thousands others have crossed over to India in search of work, the ADB study said.

Private investment has declined as foreign investors have stayed away and private investors stopped from making investments.

ADB carried out a study on GDP growth loss due to conflicts on the basis of five variables, namely development expenditure, regular expenditure, revenue level, foreign loan estimates and exchange rate.

Source: Xinhua