The Asian Development Bank (ADB) projects Nepal’s economy to grow by 3.6 percent (at market prices) in fiscal year 2024. During the press conference held today to unveil the Asian Development Outlook (ADO) April 2024, a flagship publication of the ADB, it was revealed that Nepal’s economy is expected to rebound from an estimated growth of 1.9 percent in fiscal year 2023.
Arnaud Cauchois, ADB Country Director for Nepal, noted, “A gradual relaxation of monetary policy, combined with improved consumer and investor confidence, is anticipated to spur economic activity in 2024. Moreover, industry is forecasted to experience faster growth compared to fiscal year 2023, driven by increased government capital spending in the latter half of the fiscal year and the commissioning of additional hydroelectric power by the end of fiscal year 2024.”
The service sector is also expected to witness accelerated growth as credit controls ease, interest rates decrease, and tourism revenues expand. Agriculture growth may see a slight uptick from 2.7 percent in fiscal year 2023 to 2.8 percent, though a record rice harvest is offset by a shortfall in winter crops and other agricultural production due to deficient rainfall this winter season, as outlined in the ADB press release.
The report forecasts annual average inflation to drop to 6.5 percent in fiscal year 2024 from 7.7 percent in fiscal year 2023, driven by subdued oil prices and a decline in inflation in India, Nepal’s main import source. “External risks remain relatively contained. The current account deficit may return after registering a surplus in the first half of fiscal year 2024,” clarified the ADB.
According to the ADO, the trade deficit contracted by 4.7 percent year-on-year in the first six months of fiscal year 2024, while workers’ remittances expanded by 22.6 percent year-on-year, resulting in a current account surplus of $1.2bn. However, with higher imports and stable remittance inflows expected in the remainder of the fiscal year, the 2024 current account deficit is forecasted at 0.7 percent of gross domestic product.
ADB Principal Economist for Nepal, Jan Hansen, highlighted potential downside risks to the economic outlook in fiscal year 2024, including a global economic downturn affecting Nepal’s tourism and remittance receipts. “Any intensified geopolitical turmoil could disrupt supply chains, push up global inflation, and tighten global financial conditions. This may necessitate a tightening of domestic monetary policy, potentially undermining investment and consumption, and dragging down growth,” stated the press release. Hansen reaffirmed ADB’s commitment to supporting a prosperous and inclusive Nepal.
Established in 1966 and owned by 68 members, with 49 from the region, the ADB is dedicated to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while continuing efforts to eradicate extreme poverty.
