ADB makes 4.4% GDP growth forecast for Nepal

KATHMANDU: The Asian Development Bank (ADB) has forecast Nepal’s economy to expand by 4.4% in the 2025 fiscal year. Publishing the Asia Development Outlook on Wednesday, ADB said it expects Nepal’s GDP to expand by 5.1% in the next fiscal year.

“Overall, industrial growth is projected to rise to 3.9%, driven largely by the electricity subsector, which grew by 21.4% year on year in the first quarter of 2025 FY fand is expected to expand as hydroelectric projects are implemented. Supported by increased access to credit, higher commitment in foreign direct investment inflow, and a rebound in international tourist arrivals, service sector growth is expected to rise to 4.8% in 2025 FY,” ADB said in its report.

Recent amendments to the Foreign Investment and Technology Transfer Act and the Company Act, allowing foreign direct investment in Nepal’s IT sector,
will further boost growth, according to the report.

On the demand side, ADB has said that fixed investment and consumption will drive growth in FY2025 and FY2026. “Total investment should add 6.6 percentage points to GDP growth. Private investment will be spurred as the sector’s concerns related to investment and government services are being addressed,” it said.

ADB expects inflation to moderate in 2025 and 2026 due to expected lower international oil prices and moderating inflation in India, while it expects the account balance to show a surplus in FY2025 before shifting to a deficit in FY2026. “The merchandise trade deficit widened by 1.8% in the first half of FY2025, but workers’ remittances,
which traditionally offset Nepal’s trade deficit, expanded by 1.1%, leading to a current account surplus of $1.1 billion. Despite higher imports in the latter half of FY2025, buoyant remittance inflows are expected to keep the current account surplus at 0.1% of GDP,” it added.

Earlier, the World Bank projected Nepal’s economy to grow by 4.5% in FY 2o25, up from 3.9% in FY 2o24.