ADB forecasts 4.4% growth for Nepal in current fiscal year

Kathmandu, Mar. 9

Nepal’s economy is anticipated to grow by 4.4 per cent in the current Fiscal Year 2024/25, up from an estimated growth of 3.9 per cent in FY 2023/24, the Asian Development Bank (ADB) reported in its Asian Development Outlook (ADO) April 2025.

“Nepal’s improved growth forecast is being spurred by a gradual recovery of domestic demand, addressing of reforms in the private sector, and further revitalisation of tourism and related services,” said ADB Country Director for Nepal, Arnaud Cauchois.

According to him, key economic sectors, such as manufacturing and construction, which contracted in 2023/24, will expand this fiscal year owing to stable oil and raw material prices, increased liquidity, and declining interest rates, which have paved the way for increasing credit to all production sectors.

Gross domestic product (GDP) growth is forecasted to reach 5.1 per cent in the next fiscal 2025/26, fueled by government reforms to improve capital budget execution, advancements in tourism and related services, and enhanced agricultural productivity through mechanisation and better irrigation systems, contingent on a favourable monsoon.

Likewise, inflation is expected to moderate this and next year. The inflation forecast is expected to remain within the central bank’s ceiling, assuming a normal harvest and a modest decline in inflation in India, the major source of imports, read the report.

“Nepal’s external sector gained stability in 2023/24 with higher foreign exchange reserves and a prudent monetary stance. Despite higher imports in the latter half of 2024/25, strong remittance inflows are expected to keep the current account surplus at 0.1 per cent of the GDP,” according to the ADB. Next year, a deficit equal to 2.4 per cent of GDP is projected as goods and services imports accelerate.

Likewise, risks to the outlook tilt to the downside.

The multilateral donor said that ongoing tariff rises may cause a global economic downturn, affecting Nepal’s tourism receipts and remittances, and lower foreign aid could negatively impact growth as the country relies on foreign aid to finance development needs. Under-execution of the capital budget would also dent growth prospects.

The growth forecasts were finalised prior to the 2 April announcement of new tariffs by the US administration, so the baseline projections only reflect tariffs that were in place previously, maintained the ADB. However, the report does feature an analysis of how higher tariffs may affect growth in Asia and the Pacific.

Published in The Rising Nepal daily on 10 April 2025.