KATHMANDU, April 8: Nepal’s economy is projected to expand by around 4 percent, with gradual improvements seen in production, services, and consumption sectors, according to the National Statistics Office (NSO).
NSO Spokesperson Dhundi Raj Lamichhane said the overall growth is expected to be supported by a steady recovery in agriculture, construction, tourism, and financial sectors. “Quarterly national accounts data show positive signs in economic activities compared to last year by the end of the second quarter,” he said, adding that the economy is gradually recovering from a slowdown, with improvements in domestic demand and services.
All 18 industrial categories are expected to record positive growth. Preliminary estimates from the latest annual economic report show the highest growth of 22.74 percent in agriculture and gas-related activities. Transport and storage are projected to grow by 12.51 percent, accommodation and food services by 9.65 percent, wholesale and retail trade by 5.18 percent, and other service sectors by 4.11 percent.
While external indicators remain positive, improvements in domestic conditions are seen as encouraging. The agriculture sector is expected to continue playing a key role, supported by favorable weather, a better supply of fertilizers and seeds, and government subsidies. Increased production of major crops such as paddy, maize, and wheat has helped sustain rural economic activity, forming a base for GDP growth.
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The industrial and construction sectors, however, show mixed performance. Although construction has remained sluggish in recent years, recent signs of increased government capital spending are expected to boost activity, especially with progress in large infrastructure projects. However, weak private sector investment continues to limit growth in the industry.
The service sector has become a significant catalyst for economic growth. Notable improvements have occurred in hotels, restaurants, transport, and other services as tourism gradually rebounds. Rising tourist arrivals are expected to boost tourism earnings. Banking and financial services, information technology, and trade have also experienced growth, contributing to overall economic momentum.
Consumer spending has also shown gradual improvement, supported by controlled inflation and stable remittance inflows, which have enhanced purchasing power. Increased consumption, particularly in urban areas, has further driven growth in services and trade sectors.
Remittances continue to serve as a key pillar of the economy. Increased inflows from Nepalis working abroad have strengthened foreign exchange reserves, supporting external sector stability. Adequate reserves have helped manage imports and maintain exchange rate stability.
Macroeconomic indicators for the first eight months of the current fiscal year (mid-July to mid-March) suggest the economy is moving toward stability. According to Nepal Rastra Bank (NRB), year-on-year consumer inflation stood at 3.62 percent as of mid-March, lower than the previous year, while average inflation declined to 2.13 percent. However, there is a risk that this improvement may not be sustainable without growth in production and income.
Remittance inflows increased by 37.7 percent in the first eight months, reaching above Rs 188 billion by mid-March. Foreign exchange reserves have risen to around Rs 3.413 trillion, sufficient to cover imports of goods and services for 18.5 months.
Government expenditure has reached Rs 926.59 billion, while revenue collection stands at Rs 747.28 billion, posing a challenge for fiscal management.
Despite improvements, challenges remain, including weak private investment, low credit demand in the banking sector, and underutilization of industrial capacity. Global market fluctuations, fuel price volatility, and geopolitical tensions could also affect Nepal’s economy.
The government has adopted policies to boost capital expenditure, create an investment-friendly environment, and support production-oriented sectors. Efforts are underway to improve budget implementation, accelerate infrastructure development, and promote agriculture and industry. Effective implementation of these measures is expected to strengthen growth in the coming quarters.
NRB has also sought to ease credit flow through monetary policy. Declining interest rates and improved liquidity in banks indicate a more favorable investment climate, which could help revive private sector activity.
However, experts stress that sustained and higher economic growth will require long-term policies focused on production, investment, and job creation. Structural reforms, good governance, and policy stability will be crucial to achieving stronger growth in the coming years.
