Himal Press 
KATHMANDU: The World Bank has projected Nepal’s growth to slow to in fiscal year 2025/26 from 4.6% in 2024/2525.
According to the Nepal Development Update released on Wednesday, the slowdown in growth reflects the impact of the ongoing conflict in West Asia and the lingering effects of the September 2025 unrest. “Looking ahead, reconstruction activities, continued hydropower expansion, and consumption linked to the 2027 subnational elections are expected to support a pickup in growth to an average of 4.4% over 2026/27 and 2027/28,” the World Bank said.
As per the preliminary estimates of the Nepal Statistics Office (NSO), the economy expanded by 4.05% year-on-year in the second quarter of the fiscal year 2025/26 based on seasonally unadjusted prices. Growth estimates based on seasonally adjusted prices stand at only 2.04%.
The services sector is expected to be most affected in the current fiscal year, due to slower tourism activity, higher transport costs, and potential supply chain disruptions. “A prolonged conflict in West Asia could dampen tourist arrivals, reduce remittance inflows, weaken consumption, and slow overall economic activity,” the report said. “On the upside, improved political stability following the elections in March, sound macroeconomic management, the availability of ample buffers, and continued structural reforms could strengthen investor confidence, boosting private investment and growth.”
David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka, said boosting private sector-led growth will be critical to strengthening economic resilience and creating more jobs. “To achieve this, Nepal must improve the business environment, develop foundational infrastructure, mobilize private finance, and support priority sectors such as tourism, the IT sector, and agribusiness,” he said.
Meanwhile, the latest update projects growth in South Asia to slow to 6.3% in 2025/26, from 7% in 2024/25, due to disruptions in global energy markets. “Despite the near-term slowdown, South Asia continues to grow faster than other emerging-market and developing economies. Growth is expected to recover to 6.9% in 2026/2027,” the World Bank said in its regional report.
