KATHMANDU. Nepal's economy is anticipated to grow by 4.4% in fiscal year (FY) 2025, up from an estimated growth of 3.9% in FY2024, says the Asian Development Outlook (ADO) April 2025, a flagship publication of the Asian Development Bank (ADB). 

"Nepal's improved growth forecast is being spurred by a gradual recovery of domestic demand, addressing of reforms in the private sector, and further revitalization of tourism and related services," said ADB Country Director for Nepal Arnaud Cauchois. "Key economic sectors, such as manufacturing and construction, which contracted in FY2024, will expand this fiscal year owing to stable oil and raw material prices, increased liquidity, and declining interest rates, which have paved the way for increasing credit to all production sectors. 

Gross domestic product (GDP) growth is forecasted to reach 5.1% in FY2026, fueled by government reforms to improve capital budget execution, advancements in tourism and related services, and enhanced agricultural productivity through mechanization and better irrigation systems, contingent on a favorable monsoon. Inflation is expected to moderate in FY2025 and FY2026. 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, the major source of imports. 

Nepal's external sector gained stability in FY2024 with higher foreign exchange reserves and a prudent monetary stance. Despite higher imports in the latter half of FY2025, strong remittance inflows are expected to keep the current account surplus at 0.1% of GDP. In FY2026, a deficit equal to 2.4% of GDP is projected as goods and service imports accelerate. 

Risks to the outlook tilt to the downside. Ongoing tariff rises may cause a global economic downturn, affecting Nepal's tourism receipts and remittances, and lower foreign aid could negatively impact growth as Nepal relies on foreign aid to finance development needs. Under-execution of the capital budget would also dent growth prospects. 

The growth forecasts were finalized prior to the 2 April announcement of new tariffs by the US administration, so the baseline projections only reflect tariffs that were in place previously. However, ADO April 2025 does feature an analysis of how higher tariffs may affect growth in Asia and the Pacific. 

Issuing a press release ,ADB's media authority in Nepal  Binita Shah Khadka has said  that ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships .