Nepal’s economy forecast to grow by 4.9% in FY’25 – ADB

The Asian Development Bank (ADB) predicts Nepal’s economy will grow by 4.9 per cent in FY 2025, up from 3.9 per cent in FY 2024, driven by increased domestic demand, infrastructure spending, and a revival of tourism.

According to the Asian Development Outlook (ADO) September 2024 report, agriculture growth will depend on a favourable harvest, supported by a timely paddy plantation with normal monsoon.

The industry sector is expected to benefit from increased electricity generation capacity. Services are projected to grow, driven by higher tourist arrivals, which will boost accommodation and food services activities.

The ADB anticipates that domestic demand will continue to recover, supported by the cautiously accommodative monetary policy and planned acceleration of capital budget. Wholesale and retail trade, transport and storage, and real estate activities are expected to strengthen.

Nepal Rastra Bank’s target of containing inflation within 5 per cent in FY2025 is considered achievable. 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, Nepal’s major source of imports.

Intensified geopolitical tensions in the Middle East could negatively impact Nepal’s remittance income and push up oil and food prices. A global economic downturn could also affect tourism receipts. Additionally, Nepal’s economy remains vulnerable to natural disasters and climate shocks.

Attribution: The Asian Development Bank report

Subediting: M. S. Salama