The Asian Development Bank (ADB) has forecasted that Nepal’s economy will grow by 4.9 percent in the current fiscal year 2024/25, an increase from an estimated 3.9 percent in FY 2023/24. This projection falls short of the government’s target of 6 percent, announced by Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel in his budget speech.
According to the ADB’s Asian Development Outlook published in September 2024, agricultural growth will depend on favorable harvest conditions, aided by timely paddy planting and a normal monsoon. The industrial sector is expected to benefit from increased electricity generation, while the services sector should see growth from rising tourist arrivals, boosting accommodation and food services.
The report indicates that a gradual recovery in domestic demand, supported by a cautiously accommodative monetary policy and accelerated capital spending, will strengthen wholesale and retail trade, transportation, storage, and real estate activities. ADB Country Director for Nepal, Arnaud Cauchois, noted that GDP growth will improve due to revitalized domestic demand, infrastructure spending, and tourism.
The ADB also stated that the Nepal Rastra Bank’s goal of keeping inflation within 5 percent for 2024/25 is achievable, assuming normal harvests and a modest decline in inflation in India, a key source of imports. Despite this positive outlook, the current account is projected to shift to a deficit of about 1 percent of GDP, down from a surplus of 3.9 percent, as the economy recovers and remittance inflows moderate.
Manbar Khadka, an economist at the ADB, highlighted potential risks to the outlook, including geopolitical tensions in the Middle East that could impact remittances and raise oil and food prices. He also pointed out that a global economic downturn could affect tourism revenues, and that Nepal remains vulnerable to natural disasters and climate shocks.
In contrast, the ADB forecasts strong growth for some island nations, with Palau and Samoa expected to achieve around 8 percent growth by next September. Larger economies like China and India are projected to grow by 4.2 and 7.5 percent, respectively, while South Asia’s growth leaders include Bhutan at 7 percent and the Maldives at 5.4 percent. Pakistan and Sri Lanka are expected to see growth of 2.8 percent each, with Myanmar lagging behind at a mere 1.7 percent growth rate.
