Nepal’s Economy to Grow by 4.9% in 2024/25: ADB Report
The Asian Development Bank (ADB) has predicted that Nepal’s economy will grow by 4.9% in the fiscal year 2024/25. This is an improvement from the 3.9% growth seen in the previous year. The rise in domestic demand, higher spending on infrastructure, and a strong recovery in tourism are the main reasons behind this growth.
Key Factors Behind Economic Growth
According to ADB’s report, domestic demand is increasing, and spending on infrastructure projects has picked up speed. Tourism, which is very important for Nepal, is also making a strong comeback after the challenges of recent years. Arnaud Coffey, ADB’s Country Director for Nepal, said that these factors are helping boost Nepal’s economy and its Gross Domestic Product (GDP).
The report also highlighted that favorable weather has helped farmers with timely paddy plantation, contributing to the growth in the agricultural sector. Agriculture remains a key part of Nepal’s economy and this boost is crucial for overall growth.
Additionally, the increase in electricity production is expected to help industries grow, and more tourists coming to Nepal will benefit the hospitality sector, especially hotels and restaurants. Other areas like wholesale trade, transportation, and small businesses are also expected to grow because of this economic momentum.
Inflation Control and Risks
Nepal Rastra Bank aims to keep inflation at 5.5% for the 2024/25 fiscal year, which is achievable due to good agricultural harvests and stable prices in India, Nepal’s major trade partner. ADB’s report suggests that inflation should stay within this target as long as external conditions remain steady and fiscal policies remain strong.
However, there are some risks to this positive outlook. Issues like geopolitical tensions in the Middle East could affect the amount of money sent home by Nepalis working abroad, and a global economic slowdown could hurt tourism. Additionally, natural disasters and climate change remain long-term risks for Nepal’s economy.
Improvements in Nepal’s External Sector
Despite challenges, Nepal’s external sector showed improvements in 2023/24. The trade deficit has decreased, remittances from abroad are strong, and there’s been a big rise in tourist arrivals. The current account deficit is expected to be 1% of GDP in 2024/25, slightly different from last year’s 0.9% surplus, but still stable thanks to remittances and recovery efforts.
ADB’s Role in Nepal’s Development
The ADB continues to support Nepal’s growth, focusing on sustainable and inclusive development. The bank has been helping Nepal with financial and technical assistance since it was founded in 1966. ADB’s mission is to reduce poverty and promote economic stability across the Asia-Pacific region, including Nepal.
In summary, the ADB is optimistic about Nepal’s economic future, projecting stronger growth in the coming year, while remaining aware of the risks that could affect this progress.