Asian Development Bank (ADB) has forecasted that Nepal’s economic growth rate will be only 2.8 percent in 2007 due to political instability and deteriorated labor relations.

ADB’s Asian Development Outlook (ADO) 2007 down-scaled the growth rate from the budgetary target of 5 percent for the current fiscal year.

“Lifting the country’s growth to its potential level depends crucially on sustaining peace, including timely and non-violent constituent assembly elections scheduled for June this year,” said Paolo Spantigati, acting chief of ADB Nepal Resident Mission.

For the year, ADB has further projected consumer prices to ease to about 5.3 – 5.4 percent from over 8 percent of the last fiscal year. For the fiscal year 2008, ADB has also projected the economic growth to remain at about 2 percent.

The ADO further projects South Asia to grow moderately at 7.7 percent in 2007 and rise slightly to 8 percent in 2008.

It says India’s growth will moderate to 8 percent in 2007 and then rise to 8.3 percent in 2008, down from 9.2 percent achieved in 2006.

The ADO further projects developing countries in Asia to grow at 7.6 percent in 2007 and 7.7 percent in 2008. The expansion is attributed to rapid growth in China and India.

Inflationary pressure in 2007 is expected to wane in response to tightening measures taken in the region along with the recent slide in oil prices.

It says that developing countries in Asia need to adopt a strategy of ‘walking on two legs (industry and services)’ to boost productivity growth and to create jobs for 750 million people in the coming decades.