World Bank Forecasts Nepal's Economic Growth at 3.3% for FY 2080/81, Below Government's Target

Tue, Apr 2, 2024 1:10 PM on Economy, National, Latest,

In its latest 'South Asia Development Update' unveiled on Tuesday, the World Bank revealed its forecast for Nepal's economic growth in the current fiscal year 2080/81 to be 3.3%. This projection marks a notable contrast to the government's ambitious target of achieving a 6% growth rate. The downward revision comes after the initial forecast made last January (Poush) by the World Bank, where Nepal's economic growth was estimated at 3.9%, signaling a moderated outlook. It's noteworthy that Nepal recorded a modest economic growth of 2.2% in the preceding fiscal year 2079/80.

Looking forward, the World Bank envisions Nepal's economy to witness a moderate expansion of 4.6% in the subsequent year. Moreover, the report sheds light on the bank's anticipation of limited inflationary pressures in Nepal, with an estimated increase in prices to be capped at 6.7% for the current year, followed by further moderation to 6% and 5.5% in the subsequent years. This outlook is attributed to the expected decline in global oil prices, which is anticipated to translate into controlled inflationary trends domestically.

Faris H. Hadad-Zervos, the Country Director of the World Bank for Nepal, Sri Lanka, and the Maldives, highlighted the factors contributing to the subdued economic growth, citing reduced consumption, and demand, alongside a decline in private-sector investment. Despite notable contributions from tourism and better performance in power generation, the overall investment climate in Nepal remains a point of concern. Servos stressed the need for a conducive environment to attract both domestic and foreign investments, urging a thorough review of bureaucratic processes and incentives for investors.

Furthermore, World Bank economists Nayan Krishna Joshi and Ganiyu Mijiana underscored key challenges hindering Nepal's economic prospects, including a decrease in financial deficit and political instability dampening private sector investment. Weak implementation of capital expenditure has also been identified as a factor constraining domestic demand, thereby impeding private-sector investment. These observations signal a broader imperative for addressing structural reforms and fostering an enabling environment to spur sustainable economic growth in Nepal.