Nepal's economy expected to remain resilient in face of economic shocks, says World Bank

KATHMANDU: Nepal's economy is expected to grow by 4.5% in fiscal year (FY) 2025, up from 3.9% in FY2024, despite the impact of significant natural disasters in late 2024, according to the World Bank's latest Nepal Development Update: Leveraging Resilience and Implementing Reforms for Boosting Economic Growth, released today.

The growth is projected to be driven by increased domestic trade, hydropower generation, and paddy production. The report also forecasts an average annual growth rate of 5.4% in FY2026 and FY2027, primarily supported by the services sector.

"Boosting private sector-led economic growth is critical to creating the jobs that Nepal needs. To achieve this, Nepal can build on its impressive track record of resilient growth backed by implementing key structural reforms," said David Sislen, World Bank Country Division Director for Maldives, Nepal, and Sri Lanka.

The report identifies several downside risks to the economic outlook, including geopolitical and trade-related uncertainties, further deterioration of asset quality in Nepal's financial sector, policy inconsistencies due to frequent bureaucratic changes, and delays in capital expenditure budget execution.

“The Nepal Development Update provides valuable insights on recent economic developments and highlights Nepal’s resilient growth. Boosting growth further to meet the country’s 16th Plan targets requires effective execution of the capital budget and timely completion of ongoing projects,” stated the Vice-Chairman of National Planning Commission, Professor Dr Shiva Raj Adhikari.

The Nepal Development Update, published biannually, offers a detailed analysis of recent economic developments, contextualising them within a long-term global framework.