The Asian Development Bank (ADB) projects a robust 3.6% growth for Nepal’s economy in fiscal year 2024, a marked improvement from the 1.9% growth estimated for fiscal year 2023.
In the unveiling of the Asian Development Outlook (ADO) April 2024, a flagship publication of the ADB, insights into Nepal’s economic trajectory were shared during a press conference today.
Arnaud Cauchois, ADB Country Director for Nepal, anticipates that a gradual relaxation of monetary policy, coupled with increased consumer and investor confidence, will drive economic activity in 2024.
Furthermore, the industrial sector is poised for accelerated growth compared to fiscal year 2023, bolstered by heightened government capital expenditure and the commissioning of new hydroelectric power capacity by fiscal year 2024’s end.
The service sector is also projected to witness an uptick in growth as credit constraints ease, interest rates decline, and tourism revenues expand.
However, agricultural growth is expected to see only a marginal increase from 2.7% to 2.8%, with a strong rice harvest offset by lower winter crop yields and other agricultural challenges stemming from insufficient winter rainfall.
The report forecasts a decline in annual average inflation to 6.5% in fiscal year 2024 from 7.7% in fiscal year 2023, attributed to subdued oil prices and decreased inflation in India, Nepal’s primary import source.
Despite relatively contained external risks, the ADB cautions that the current account surplus witnessed in the first half of fiscal year 2024 may revert to a deficit.
The contraction of the trade deficit and a significant increase in workers’ remittances resulted in a surplus of $1.2 billion in the current account.
However, with higher imports and steady 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.
ADB Principal Economist for Nepal, Jan Hansen, outlined potential downside risks to the economic outlook, including a global economic downturn impacting Nepal’s tourism and remittances, as well as geopolitical unrest disrupting supply chains and global inflation.
Hansen reiterated ADB’s commitment to supporting Nepal’s prosperity and inclusivity.
Established in 1966 and owned by 68 members, 49 from the region, ADB remains steadfast in its mission to foster a prosperous, inclusive, resilient, and sustainable Asia-Pacific region while striving to eradicate extreme poverty.
