Policy uncertainty hit economy as stocks and imports suffer most
Summary
Uncertainty in Nepal's economic policies significantly harms the economy, with stock market declines, reduced imports, and inhibited investment. A Nepal Rastra Bank study highlights the need for stable and predictable fiscal and monetary policies.
Key Points
- Prolonged economic policy uncertainty in Nepal can reduce the Nepse index by up to 10 percent and real imports by 15 percent.
- The Nepal Rastra Bank study developed Nepal's first Economic Policy Uncertainty Index using Google trends data from 2011 to 2026.
- Policy uncertainty spikes during budget announcements and central bank monetary policy releases, sharply affecting financial markets.
- Stable and predictable policies are recommended to sustain investment, improve investor confidence, and support economic growth.
