ADB Projects Nepal’s Economy to Grow by 4.9% in FY 2024/25

The Asian Development Bank (ADB) has forecasted that Nepal’s economy will grow by 4.9% in the fiscal year 2024/25, surpassing the 3.9% growth recorded in the previous fiscal year. This projection was revealed in ADB’s latest Asian Development Outlook report, which attributes the anticipated growth to a surge in domestic demand, increased capital expenditure, and a strong recovery in tourism.

Arnaud Coffey, ADB’s Country Director for Nepal, stated, “The uptick in domestic demand, accelerated infrastructure spending, and the revival of tourism will play a key role in boosting Nepal’s GDP.” Additionally, favorable weather conditions have supported timely paddy planting, contributing to growth in the agricultural sector, which remains crucial to Nepal’s economy.

The report highlights that the expansion of electricity production will further support industrial growth. Meanwhile, a sharp increase in tourist arrivals is expected to strengthen the hospitality sector, particularly in accommodation and food services. Nepal’s wholesale and retail trade, transportation, and household business activities are also projected to benefit from this economic momentum.

ADB also projects that Nepal Rastra Bank’s target of keeping inflation at 5.5% for FY 2024/25 is achievable, thanks to favorable agricultural output and the moderation of inflation in India, Nepal’s major trade partner.

External Risks and Challenges

Despite the positive outlook, ADB warns of potential risks. Geopolitical tensions, such as those in the Middle East, could disrupt remittance inflows and push up fuel and food prices. Global economic downturns could also reduce Nepal’s tourism revenue. Furthermore, the report underscores that natural disasters and climate events present long-term risks to Nepal’s economic resilience.

Nevertheless, Nepal’s external sector showed signs of improvement in FY 2023/24, with a reduction in the trade deficit, strong remittance inflows, and a surge in tourist arrivals. The current account deficit is forecasted to be 1% of GDP in FY 2024/25, slightly reversing the 0.9% surplus from the previous year.

ADB’s Commitment to Nepal’s Development

ADB reaffirmed its commitment to fostering sustainable and inclusive development in Nepal. The bank aims to continue supporting economic stability and long-term growth in Nepal through targeted financial and technical assistance.

Established in 1966, ADB has 68 member countries, 49 of which are from the Asia-Pacific region. Its mission focuses on reducing poverty and promoting sustainable development across Asia.