Market System and Private Sector Resilience during COVID-19: Lessons from Nepal
The COVID-19 pandemic in 2020 and 2021 has taken a significant toll on Nepal’s economy, especially on the livelihoods of the informal sector, and continues to test the resilience of an already strained agricultural market system. The World Bank’s most recent Development Update, published in April 2021, showed glimpses of optimism with estimations that if the vaccination rollout is successful and international tourism is able to resume gradually, Nepal can experience a subdued recovery with gross domestic product (GDP) projected to grow by 2.7% in Fiscal Year (FY) 2021 and 3.9% in FY 2022. However, the most recent lockdown put in place on April 26, 2021, in response to the COVID-19 crisis unfolding in India and the subregion once again casts uncertainty and new health and economic concerns for Nepal.
Within a month under the restrictions first imposed in March 2020, over half of Nepal’s micro, small, and medium enterprises (MSMEs) — which contribute 22% to the country’s GDP, employing about 1.8 million people — were facing the risk of permanently closing their operations. A 2020 study suggests that the pandemic differentially affected subsistence- and market-based commercial farming systems. Traditional subsistence farmers who depend on local inputs appeared to be somewhat resilient during the crisis compared to commercial farmers, because their produce is typically consumed at home or locally and they are less dependent on markets. Commercial or semicommercial farmers, who are typically located near the urban centers or around the periphery of cities and emerging towns, faced greater challenges as a result of a lack of resilient supply networks to reach the local market during the lockdown. What does this mean for the USAID Mission and implementing partners working to improve food security and market systems in Nepal?
In this case study, we explore the resilience the country’s market system showed during the pandemic in 2020 through the lens of USAID resilience and food security investments in Nepal.