Nepal's economy set to grow by 3.6% in FY 2024: ADB reports

KATHMANDU: Nepal's economy is expected to grow by 3.6% in the fiscal year 2024, according to the Asian Development Bank (ADB).

In a press conference today, ADB Country Director for Nepal, Arnaud Cauchois, stated that the gradual relaxation of monetary policies and increased confidence among consumers and investors would drive economic activity in 2024. The industrial sector is predicted to grow faster than in the previous fiscal year, thanks to higher government spending and the addition of new hydroelectric power capacity.

Service sector growth is also anticipated to pick up as credit controls ease, interest rates drop, and tourism revenues rise. However, agricultural growth may only see a slight increase due to challenges like lower winter rainfall affecting winter crop yields.

The ADB report projects a decline in inflation to 6.5% in fiscal year 2024 from 7.7% in the previous year, mainly due to lower oil prices and decreased inflation in India, Nepal's main source of imports.

While the current account recorded a surplus of $1.2 billion in the first half of fiscal year 2024, the ADB warned of a potential deficit in the latter part of the year due to increased imports and stable remittance inflows.

Jan Hansen, ADB Principal Economist for Nepal, highlighted potential risks to the economic outlook, including a global economic downturn affecting Nepal's tourism and remittance receipts, as well as geopolitical unrest disrupting supply chains.

Despite these challenges, Hansen reaffirmed ADB's commitment to supporting Nepal's economic growth and inclusivity.