Nepal's Economy to Grow at 3.85% in 2025-26, Below Decade Average

Though this is slightly higher than the government's revised projection of 3.5 per cent made in February, it reflects the continuing low-growth trajectory since Covid-19 struck the country in fiscal year 2019-20, when the economy contracted by 2.37 per cent.

Nepal's Finance Ministry stated in a white paper on the national economy released on Monday that the country's economic growth has remained relatively low and unstable over the last decade, with the average growth rate standing at 4.2 per cent.

By releasing the National Accounts Estimate on Tuesday, the statistics body said the projected growth would remain below the average growth rate of the past 10 years. Compared to the pace of economic expansion in neighboring countries, Nepal's economic growth appears significantly slow.

According to the National Statistics Office, the low growth rate in the agriculture sector is expected to affect overall economic growth in the current fiscal year.

The agriculture, forestry, and fisheries sector, which is preliminarily estimated to contribute 24.03 per cent to the economy in fiscal year 2025-26, is projected to grow by only 1.58 per cent.

Paddy, which accounts for the largest share of agricultural output in the country, is projected to decline by 4.16 per cent, while maize, wheat, millet, pulses, and industrial crops are expected to record modest growth.

The non-agriculture sector is projected to grow by 4.54 per cent in the current fiscal year.

The electricity and gas sector is estimated to record the highest growth rate in gross value added at 20.93 per cent. The financial and insurance sector follows as the second-fastest-growing sector, with an estimated growth rate of 9.16 per cent. On the other hand, public administration and defense (0.23 per cent) and education (1.50 per cent) are projected to experience comparatively lower growth rates.

The report did not mention the impact of the US-Iran war in West Asia, but the Nepali government has already acknowledged that it is affecting the country's economy and poses risks to Nepal's remittance-dependent economy.

Due to disruptions in supply chains caused by the conflict, the price of crude oil in the international market increased by nearly 60 per cent within a month, creating pressure on domestic prices as well.

At the same time, Nepal's economy, which is dependent on chemical fertilizers, is likely to be further affected.

Although the region accounts for a relatively smaller share of Nepal's merchandise trade (2 per cent of exports and 5 per cent of imports) and tourist arrivals (1.5 per cent), disruptions in major international transit hubs such as Doha, Dubai, and Abu Dhabi could have serious adverse impacts on the overall tourism sector and foreign trade.

The World Bank and the Asian Development Bank had earlier warned that the conflict in West Asia could pose significant downside risks to Nepal's economy through rising global oil prices, declining tourist arrivals, and a potential drop in remittances-particularly from Gulf Cooperation Council (GCC) countries, which account for around 40 per cent of Nepal's total remittance inflows.

- IANS