NewBiz Report

April 11: Asian Development Bank (ADB) on Thursday said that Nepal's economy will grow at 3.6 percent in FY2024. Making public its latest Asian Development Outlook (ADO) for April 2024, the Manila-based lender said that Nepal's economy is projected to expand by 3.6 percent in FY2024, a significant increase from the estimated growth of 1.9 percent in FY2023.

ADB forecasts that GDP growth is expected to accelerate to 4.8 percent in FY2025, primarily driven by increased capital expenditure. Continued progress in tourism and related services is also anticipated to contribute to higher growth, assuming a favorable harvest.

The ADB in its report has said that the lingering weakness in domestic demand that continued in the first quarter of FY2024 will gradually dissipate in the remainder of the fiscal year as government investment outlays accelerate. "Private consumption expenditure will rise as remittance inflow strengthens and prices moderate, while private investment expenditure will expand on monetary easing and financial sector reforms encouraging term loans," states the ADB report. 

The public investment which contracted by 20.2 percent in FY2023 is expected to expand by 1.5 percent under the FY2024 budget as development projects are implemented.

According to ADB, the gradual relaxation of monetary policy in FY2024 and improving consumer and investor confidence will stimulate economic activity. "Key areas of the economy that contracted in FY2023, notably manufacturing and construction, have begun to expand, and all production sectors are expected to grow in FY2024," said ADB. 

The industry is poised for more rapid growth compared to FY2023, with the government ramping up capital spending in the latter half of the fiscal year. Additionally, the ADB reports that an additional 900 MW of electricity will come online by the end of FY2024. The service sector is also expected to experience accelerated growth as credit controls ease, interest rates continue to decrease, and tourism revenues expand. Agriculture growth may see a marginal increase from 2.7 percent in FY2023 to 2.8 percent, driven by a record rice harvest, although this growth could be tempered by a shortfall in winter crops and other agricultural production due to anticipated deficient rainfall this season.