World Bank puts Nepal's economic growth for this year at 5.1%

Kathmandu, Oct. 2

The World Bank (WB) has projected that Nepal's economic growth will accelerate to 5.1 per cent in the Fiscal Year 2024/25 from 3.9 per cent in the last FY 2023/24.

This growth will be driven by anticipated high tourist arrivals, along with increased hydropower and paddy production, according to the World Bank’s latest economic update, 'Nepal Development Update: International Migration and Well-being in Nepal', released in the Capital on Wednesday.

Nepal’s economy is projected to grow by 5.5 per cent in the next FY 2025/26.

"The private sector is expected to contribute to the country’s growth, as it is anticipated to benefit from the central bank’s relaxing of monetary policy and easing of regulatory requirements," said the report.

Earlier, another multilateral donor, the Asian Development Bank (ADB), set the expansion rate of the Gross Domestic Product (GDP) at 4.9 per cent for the current fiscal.

Both the estimates are below the projections of 6 per cent growth made by the Government of Nepal through the budget of this year.

However, the World Bank report identifies multiple risks to the outlook, including heightened vulnerabilities in the financial system such as a rise in non-performing loans that may limit private sector credit growth, potential policy discontinuity that could deter investment, delays in the execution of the capital budget affecting infrastructure development, and regional instability and trade disruptions that could reduce tourism and domestic demand.

"Nepal's economy is on a gradual recovery path. Our focus on enhancing capital expenditure, particularly by completing nearly finished projects, along with reforms in the budgetary process, will strengthen macroeconomic stability, boost domestic productivity, and create more jobs," said Prof. Dr. Shiva Raj Adhikari, Vice-Chairman of the National Planning Commission.

According to the report, shocks in migrant-receiving countries such as the Gulf Cooperation Council countries and Malaysia, could also slow growth, impacting international remittances that are crucial for raising household consumption, reducing poverty, and developing human capital.

However, migration from Nepal is costly, opportunities are unequal, and the process remains challenging for many. The report presents the latest evidence on the benefits and costs of Nepal’s emigration trend and highlights key policy interventions needed to build an inclusive migration management system aimed at ensuring sustainability and maximizing rewards.

“Maintaining growth momentum is key to Nepal’s development. This requires continued reform in critical areas such as infrastructure, governance, human capital development, and developing an environment which encourages and supports the private sector,” said David Sislen, World Bank Country Director for Maldives, Nepal, and Sri Lanka. 

Nepal has greatly benefited from remittances from overseas workers and improving the management of these inflows, better supporting Nepalis who choose to seek work abroad, and also building a vibrant domestic economy which allows for skilled Nepalis to be productive in Nepal is critical to the future of the country, according to him.

"An inclusive migration management system would establish a transparent recruitment process, better prepare migrants to go abroad, ensure the safety and mobility of migrants in those labour markets, plan for long-term skills and destination diversification, and create an economic environment conducive to harnessing the capital and skills of returnees," the WB said in a statement. 

 Published in The Rising Nepal daily on 3 October 2024.