ADB forecasts 4.9% growth for Nepal

KATHMANDU: Asian Development Bank (ADB) expects Nepal’s economy to expand by 4.9% in fiscal year 2024/25, up from an estimated 3.9% in 2023/24.

“Gross domestic product growth will pick up on a gradual recovery of domestic demand, acceleration of infrastructure spending, and further revitalization of tourism and related services,” ADB Country Director for Nepal, Arnaud Cauchois, said, launching the latest edition of ADB’s flagship publication Asian Development Outlook.

According to the outlook, agriculture growth will hinge on a favorable harvest owing to a timely paddy plantation with normal monsoon. “Industry growth will be supported by increased electricity generation capacity. And services are expected to grow, supported by higher tourist arrivals, that will boost accommodation and food services activities,” it added.

With further recovery in domestic demand supported by the cautiously accommodative monetary policy, planned acceleration of capital budget, wholesale and retail trade, transportation and storage and real estate activities are expected to strengthen, the ADB said in its report.

“Nepal Rastra Bank’s target of containing inflation within 5.0% in 2024/2025 seems attainable. 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 Nepal’s imports,” it added.

ADB has said in the report that external risks will remain relatively well-contained. “The external position strengthened in the last fiscal year because of declining trade deficit amid buoyant remittance inflows and increase in tourist arrivals,” it said. “However, the current account gap will likely turn to a deficit of about 1% of GDP in 2024/2025 from a surplus of 3.9% as the economy recovers and the remittance inflows moderate.”

The Manila-based multilateral lender has warned that intensified geopolitical tensions in the Middle East could hurt Nepal’s remittance income and push up oil and food prices. “A global economic downturn could affect its tourism receipts. A perennial risk to economic growth in Nepal is high vulnerability to natural disasters and climate shocks,” it added.