8th October 2025, Kathmandu
The World Bank’s latest ‘South Asia Development Update’ report projects that Nepal’s economic growth rate will be sharply curtailed, reaching only 2.1% in the current fiscal year (2082/83 BS).
Nepal’s Economic Growth Projected
This marks a significant deceleration from the 4.61% growth recorded last year (2081/82 BS). The projected growth range is estimated to be between a modest 1.5% and 2.6%.
Key Factors Driving the Decline
The World Bank pinpoints rising political and economic uncertainty as the central cause for the projected decline. Specifically, the report highlights the impact of:
Gen Z Movement and Instability: The unrest during the Gen Z movement in Bhadra (September) created a volatile environment. The subsequent increase in political and economic uncertainty has had a massive dampening effect on growth prospects.
Declining Investor Confidence: The current unstable political atmosphere has eroded investor confidence, discouraging both domestic and foreign investment.
Tourism Downturn: The turmoil has led to a sharp drop in international tourist arrivals, directly impacting a vital service sector of the economy.
Pressure on Financial Sector: Damage to both private and public property during the unrest is expected to create significant strain on the insurance and financial sectors.
Comparison with Last Year’s Performance (2081/82 BS)
In contrast to the current forecast, Nepal’s economy showed signs of resilience last year:
Economic Indicator (2081/82 BS) Value / Rate
GDP (Estimated) Approx. Rs 61 Kharba 7 Arba
Economic Growth Rate 4.61%
Inflation Rate 4.06%
Remittance Growth 19.2% (reaching Rs 1.723 Kharba)
Foreign Exchange Reserves Rs 2.677 Kharba
World Bank’s Urgent Policy Recommendations
Despite the South Asian region’s overall strong growth forecast of 6.6%, Nepal’s political volatility is set to limit its progress. The World Bank emphasizes that sustained economic recovery for Nepal hinges on critical policy actions:
Political Stability: Ensuring a stable political environment is paramount to restoring confidence.
Investment-Friendly Policies: Implementing and maintaining clear policies that encourage investment.
Environmental Balance: Focusing on measures that promote environmental sustainability alongside economic growth.
The report concludes that without these fundamental shifts, the economy will continue to lag due to political instability and a weak investment climate.
For more: Nepal’s Economic Growth Projected