KATHMANDU, April 11 (Xinhua) -- Asian Development Bank (ADB) has projected that Nepal's economy will grow at a slower pace of 4.9 percent in Fiscal Year (FY) 2018 from 6.9 percent in 2017.

In its "Macro-Economic Update Report" released in Kathmandu on Wednesday, the Asian lender projected that there is a slight upward revision of the 4.7 percent growth forecast published in its September edition last year, reflecting better-than-expected harvest despite floods in mid-August.

This higher forecast hinges on the assumption of normal monsoon and acceleration of ongoing mega projects.

According to the preliminary data of the Ministry of Agricultural, Land Management and Cooperatives, paddy production will fall to 5.1 million tons, a decrease of 1.5 percent from a year earlier this fiscal year.

However, the production of other summer crops is expected to increase this year compared to the previous year.

"Even with increased capacity utilization of industries, industrial growth is set to be lowering in 2018 from the high rate in 2017, due to low investment in the manufacturing sub-sector for years owing to political instability and structural bottlenecks," the statement issued by ADB Nepal reads.

The report mentioned that the service sector will however remain buoyant given the expansion of wholesale and retail trade, financial intermediation and travel and tourism sub-sectors.

Average annual inflation is expected to rise moderately to 5.5 percent in 2018 from 4.5 percent in 2017. This is below the inflation target of 7.0 percent set by the central bank Nepal Rastra Bank.

Likewise, revenue collection increased by about 21.0 percent year-on-year in the first seven months of 2018 compared to a year earlier period. The report further stated that import growth has outpaced export growth leading to a widening trade deficit.

This edition of Macroeconomic Update sheds light on the importance of agricultural commercialization in Nepal and the need for its effective implementation by addressing legal, institutional, financial and infrastructural barriers.

With about one-third share of GDP, agriculture continues to provide livelihood to two-thirds of the country's population, but mostly at a subsistence level," reads the statement.

The report stressed that commercialized agriculture via contract and cooperative farming methods can be one of the major sources of revenue generation for the country if practiced on a wider scale.