As per word bank Nepal Development update 024 Nepal’s real GDP growth is projected to accelerate to 5.1 percent in FY25 and 5.5 percent in FY26. Wholesale, retail, construction, and manufacturing sectors- that collectively account for over one-fifth of GDP-are poised to benefit from the NRB’s loosening of monetary policy and easing of regulatory requirements, including the relaxation of working capital requirements, easing of loan classification and loan- loss provisioning for businesses that continue servicing loans despite closures due to unforeseen circumstances. These measures are expected to stimulate private investment, while remittance-driven private consumption and increased exports of hydropower and tourism are anticipated to further bolster economic growth.
Nepal’s real GDP growth accelerated to 3.9 percent in FY24, up from 2 percent in FY23. The services sector was the key driver, fueled by a 30.7 percent surge in tourist arrivals, which boosted activities in transportation, accommodation, and food services. Increased hydropower production, by over 450 MW, plus a 4.3 percent rise in paddy production also contributed to the growth.
The current account surplus is expected to narrow as the trade deficit widens. This widening will stem from a rise in both merchandise and service imports.
International remittances plays a significant role in Nepal’s economy, affecting household consumption, poverty reduction, and human capital development. There is also a risk that economic growth could slow if there is a shock in migrant-receiving countries.
While the medium-term outlook for Nepal remains positive, it is subject to several downside risks.