The national economy posted a modest year-on-year expansion in the first three months of fiscal year 2025/26, even as quarter-on-quarter indicators point to a contraction, according to the National Accounts Estimates released by the Nepal Statistics Office (NSO).
Based on seasonally unadjusted data—figures that are not corrected for seasonal patterns such as festivals or harvest cycles, the Gross Domestic Product (GDP) at basic prices grew by 3.02 percent in the first quarter of 2025/26 compared to the same period of the previous fiscal year.
The year-on-year growth, however, remained relatively subdued due to contraction in several production-related activities, including food grain crops, forestry products, life insurance services, and domestically produced construction materials. Despite these pressures, growth in electricity generation and distribution, financial activities, livestock production, fruits and vegetables, trade services, and tourism inflows helped keep overall GDP growth in positive territory.
According to the NSO, estimates of seasonally unadjusted quarterly GDP are first produced on the basis of indicators related to various economic activities. Estimates of seasonally adjusted quarterly GDP are then prepared using the X-12 ARIMA method introduced by the International Monetary Fund (IMF). Quarterly growth rates are calculated based on these estimates, according to the NSO, it added.
According to the estimates, all 18 industrial classifications recorded positive growth on a year-on-year basis during the quarter. This indicates a broad-based but moderate recovery when compared with the first quarter of 2024/25.
In contrast, seasonally adjusted data show that the economy contracted by 1.68 percent in the first quarter of 2025/26 compared to the fourth quarter of 2024/25. According to the NSO, this contraction reflects negative growth in 13 out of 18 industrial sectors, which outweighed modest expansion in the remaining sectors.
Among sectoral performances on a year-on-year basis based on seasonally unadjusted data, the electricity and gas sector recorded the highest growth at 14.91 percent, supported by increased power generation and distribution. This was followed by financial and insurance activities, which grew by 7.07 percent, and professional, scientific and technical services, which expanded by 5.52 percent.
The agriculture, forestry and fisheries sector—the single largest contributor to the economy—posted a growth rate of 1.36 percent. Although paddy production declined during the period, modest increases in livestock, vegetable, and fruit production helped keep overall agricultural value added in positive territory.
Wholesale and retail trade; repair of motor vehicles & motorcycles, the second-largest sector, was estimated to have grown by 3.89 percent year-on-year, driven by growth in domestic production of tradable goods as well as higher imports. On the lower end of the spectrum, water supply, sewerage and waste management activities recorded the weakest growth at 1.11 percent, followed closely by human health and social work activities at 1.19 percent.
Seasonally adjusted quarter-on-quarter data present a more challenging picture. During the review period, only five sectors registered positive growth, while the remaining 13 sectors experienced contraction. The electricity and gas sector again stood out with a 4.95 percent growth compared to the previous quarter.
The agriculture, forestry and fisheries sector, however, contracted by 1.65 percent . Mining and quarrying saw the sharpest decline at 10.05 percent, followed by public administration, defense and compulsory social security-related activities, which shrank by 5.95 percent.
The NSO said the negative quarter-on-quarter performance largely explains the overall contraction in seasonally adjusted GDP during the first quarter, even though year-on-year indicators remain positive.
