Nepal's economic growth is projected to rise to 5.1 percent in FY25 from 3.9 percent in FY24, as stated in the World Bank’s latest report, "Nepal Development Update: International Migration and Well-being in Nepal." This growth is expected due to increased tourist arrivals, hydropower, and paddy production.
The private sector is anticipated to benefit from the central bank’s relaxed monetary policy and eased regulatory requirements, contributing to an expected 5.5 percent growth in FY26. However, several risks could impact this outlook. These include vulnerabilities in the financial system such as rising non-performing loans, potential policy discontinuity deterring investment, delays in capital spending affecting infrastructure development, and regional instability potentially reducing tourism and domestic demand.
"Nepal's economy is on a gradual recovery path," said Professor Dr. Shiva Raj Adhikari, Honorable Vice Chairman of the National Planning Commission. He emphasized focusing on capital expenditure enhancement and budgetary process reforms to strengthen macroeconomic stability.
External factors like shocks in migrant-receiving countries could also slow growth by impacting international remittances crucial for household consumption and poverty reduction. The report highlights that migration from Nepal remains costly with unequal opportunities.
David Sislen, World Bank Country Director for Maldives, Nepal, and Sri Lanka noted the importance of maintaining growth momentum through continued reform in infrastructure, governance human capital development, and supporting the private sector. He stressed improving management of remittance inflows while building a domestic economy that allows skilled Nepalis to be productive within Nepal.
An inclusive migration management system would enhance recruitment transparency and ensure migrant safety abroad while planning for skills diversification upon their return.
The biannual Nepal Development Update provides comprehensive analysis of significant economic developments over the past year within a global context.