The Asian Development Bank (ADB) projects a robust 3.6% growth for Nepal’s economy in the fiscal year 2024, a notable increase from the 1.9% growth estimated for fiscal year 2023.
In a press conference unveiling the Asian Development Outlook (ADO) April 2024, a key publication of the ADB, insights into Nepal’s economic trajectory were shared.
Arnaud Cauchois, ADB Country Director for Nepal, anticipates that a gradual easing of monetary policy, coupled with bolstered consumer and investor confidence, will drive economic activity in 2024.
Furthermore, the industrial sector is expected to experience accelerated growth compared to fiscal year 2023, fueled by heightened government capital spending and the addition of new hydroelectric power capacity by the end of fiscal year 2024.
The service sector is also poised for rapid expansion as credit constraints ease, interest rates decline, and tourism revenues swell.
However, agricultural growth may only see a slight uptick from 2.7% to 2.8%, as a robust rice harvest is counterbalanced by lower winter crop yields and other agricultural hurdles stemming from insufficient winter rainfall.
The report forecasts a decrease in annual average inflation to 6.5% in fiscal year 2024 from 7.7% in fiscal year 2023, attributed to subdued oil prices and diminished inflation in India, Nepal’s primary import source.
Despite relatively contained external risks, the ADB cautions that the current account surplus recorded in the first half of fiscal year 2024 may revert to a deficit.
The trade deficit contraction and a significant increase in workers’ remittances contributed to a surplus of $1.2 billion in the current account. However, with higher imports and stable remittance inflows expected in the latter part of the fiscal year, the 2024 current account deficit is projected at 0.7% of gross domestic product.
Jan Hansen, ADB Principal Economist for Nepal, underscores potential downside risks to the economic outlook, such as a global economic downturn impacting Nepal’s tourism and remittances, as well as geopolitical unrest disrupting supply chains and affecting global inflation.
Hansen reaffirms the ADB’s commitment to supporting Nepal’s prosperity and inclusivity.
Established in 1966 and comprising 68 members, including 49 from the region, the ADB remains steadfast in its mission to foster a prosperous, inclusive, resilient, and sustainable Asia-Pacific region while combating extreme poverty.
