Nepal’s Economy to Gradually Improve in FY2024 

KATHMANDU, NEPAL (11 April 2024) — Nepal’s economy is anticipated to grow by 3.6% (at market prices) in fiscal year (FY) 2024, up from an estimated growth of 1.9% in FY2023, says the latest Asian Development Outlook (ADO) April 2024, a flagship publication of the Asian Development Bank (ADB). 

“A gradual relaxation of monetary policy coupled with improved consumer and investor confidence is expected to stimulate economic activity in FY2024. Moreover, industry is projected to grow more rapidly than in FY2023 as capital spending by the government ramps up in the second half of the fiscal year, and as additional hydroelectricity power comes online by the end of FY2024,” said ADB Country Director for Nepal Arnaud Cauchois.  

Service sector growth will also likely accelerate as credit controls ease, interest rates further decrease, and tourism revenues expand. Agriculture growth may increase marginally from 2.7% in FY2023 to 2.8% as a record rice harvest is tempered by a shortfall in winter crops and other agricultural production, given the deficient rainfall this winter season. 

The report projects annual average inflation to fall to 6.5% in FY2024 from 7.7% in FY2023 on subdued oil prices and a decline in inflation in India, Nepal’s main import source.  

 External risks remain relatively well contained. The current account deficit may fall again into deficit after registering a surplus in the first half of FY2024. As the trade deficit contracted by 4.7% year-on-year in the first 6 months of FY2024, and as workers’ remittances expanded by 22.6% year-on-year, the current account recorded a surplus of $1.2 billion. However, amid higher imports and stable remittance inflows in the remainder of the fiscal year, the FY2024 current account deficit is forecast at 0.7% of gross domestic product.  

“Downside risks to the economic outlook in FY2024 may arise from a downturn in the global economy affecting Nepal’s tourism and remittance receipts,” said ADB Principal Economist for Nepal Jan Hansen.  

Any intensified geopolitical turmoil could disrupt supply chains, pushing up global inflation and tightening global financial conditions. This may lead to a tightening of domestic monetary policy, undermining investment and consumption, and dragging down growth.  

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.