Nepal's Economic Growth Projected to Reach 5.1% in FY 2025, Driven by Tourism and Hydropower
Nepal's economy is anticipated to accelerate significantly, with projected growth rising to 5.1 percent in the fiscal year 2025, up from 3.9 percent in FY 2024. This growth is driven primarily by expected increases in tourist arrivals and enhanced production in hydropower and paddy sectors, as highlighted in the World Bank's latest economic report, Nepal Development Update: International Migration and Well-being in Nepal, released today.
The private sector is expected to play a crucial role in this economic upturn, benefiting from the central bank’s recent loosening of monetary policy and a reduction in regulatory hurdles. Further, Nepal's economy is projected to grow by 5.5 percent in FY 2026. Despite these optimistic forecasts, the report outlines several risks that could hinder this outlook. These include vulnerabilities in the financial system, notably a rise in non-performing loans, potential policy shifts that may deter investment, delays in capital spending that could impede infrastructure projects, and regional instability that might dampen tourism and domestic demand.
Vice Chairman of the National Planning Commission, Prof. Dr. Shiva Raj Adhikari, remarked on the gradual recovery of Nepal's economy, emphasizing the need to enhance capital expenditure by completing ongoing projects and reforming the budgetary process. This focus aims to strengthen macroeconomic stability, boost domestic productivity, and generate employment opportunities. However, challenges in migrant-receiving countries, such as those in the Gulf Cooperation Council and Malaysia, could slow growth and impact international remittances, which are vital for household consumption, poverty alleviation, and human capital development. The report advocates for an inclusive migration management system that ensures transparency, prepares migrants adequately, and fosters an economic environment that benefits returnees, essential for the nation’s sustainable development.
