April 4: The Asian Development Bank (ADB) has estimated Nepal’s economic growth (gross domestic product growth) rate to be 4.1 per cent for the fiscal year 2023, down from an estimated growth of 5.8% in fiscal year 2022. 

“Nepal’s gross domestic product (GDP) growth is projected to slow largely due to tight monetary policy, slackened domestic demand, the unwinding Covid stimulus, and persistent global headwinds,” the bank says.

“There are downside risks to the outlook such as a global downturn hitting Nepal’s tourism and remittance receipts,” said ADB Country Director for Nepal Arnaud Cauchois. 

“Accelerating capital budget spending through focused investment planning, financial management, and project readiness will help spur Nepal’s economic growth over the years,” the bank added. 

The bank estimates that the  agriculture growth rate will likely be 2.0% in FY2023, down from 2.3% in FY2022. Despite the surge of paddy output, scanty rainfall in winter will affect winter crop yield and overall agricultural output. 

Similarly, industry growth is estimated to decrease due to higher interest rates, import restriction measures, slowdown in domestic consumption, and a dampened external demand.

Services' growth is projected to be 4.4% from 5.9% in FY2022. Credit control measures and a hike in interest rates have slowed down real estate, wholesale, and retail trade activities. While tourism growth has been strong, international tourist arrivals are still at half of the pre-pandemic level, according to the ADB report. 

ADB forecasts that Nepal’s inflation will edge up to 7.4% in FY 2023 from 6.3% in FY2022, despite the tight monetary policy reigning in demand. Inflation is expected to decelerate to 6.2% in FY2024 assuming a normal harvest, subdued oil prices, and a decline in inflation in India.