Nepal’s Economy Poised for Above-Average Growth Amid Monetary Easing and Improved Fundamentals

Kathmandu — Nepal’s economy is expected to record above-average growth, supported by accommodative monetary policies, improving domestic conditions, and a favorable external environment, according to a recent assessment by Nepal Rastra Bank (NRB).

The projection is based on the Integrated Annual Economic Activity Study Report for Fiscal Year 2024/25 (FY 2081/82) prepared by NRB’s Economic Research Department. The report highlights that easing monetary conditions have played a key role in expanding economic activities across multiple sectors.

According to the central bank, several global and domestic factors have contributed to the positive outlook. Internationally, declining fuel and food prices have reduced cost pressures, while domestically, lower interest rates on loans and deposits have helped revive credit demand. At the same time, a significant rise in hydropower generation has strengthened energy supply, supporting industrial and service-sector activities.

Tourism has also shown strong signs of recovery, with an increase in foreign tourist arrivals contributing to higher service-sector earnings. In addition, improvements in exports and remittance inflows have strengthened foreign exchange reserves and supported overall economic stability. The report notes that inflationary pressure is expected to remain subdued in the current fiscal year 2025/26 (FY 2082/83), creating further room for sustained economic expansion.

NRB’s assessment points out that liquidity conditions in the financial system remain comfortable, enabling banks and financial institutions to continue lending to productive sectors. Government initiatives aimed at promoting good governance, accelerating reconstruction works, and prioritizing large, ready-to-implement projects—while postponing smaller and less-prepared ones—are also expected to boost economic momentum.

Data from the National Statistics Office support this outlook. Preliminary estimates show that Nepal’s economic growth rate in FY 2024/25 is likely to reach 4.6 percent in real terms (at consumer prices) and 4.0 percent at current prices. This marks an improvement compared to the revised growth estimate of 3.7 percent in FY 2023/24 (2080/81).

Sector-wise, the services sector continues to dominate the economy, with an estimated 62.0 percent contribution to Gross Domestic Product (GDP). Agriculture is expected to contribute 25.2 percent, while the industrial sector’s share stands at 12.8 percent, reflecting gradual but steady industrial recovery.

From a regional perspective, Bagmati Province remains the economic hub of the country, accounting for 36.5 percent of national GDP. Koshi Province follows with a 15.9 percent share, while Karnali Province contributes the smallest portion at 4.2 percent, highlighting persistent regional disparities.

The banking sector has also shown moderate growth. As of mid-July 2024, loans to the industrial sector accounted for 30.42 percent of total credit extended by banks and financial institutions. Compared to the previous year, bank deposits increased by 12.5 percent, while credit expansion grew by 8.2 percent, with the average credit-to-deposit ratio standing at 76.6 percent. Bagmati Province again leads in financial activity, holding 65.8 percent of total deposits and 59.5 percent of total outstanding loans nationwide.

External trade data further underline the improving economic environment. During FY 2024/25, merchandise exports surged by 81.8 percent, reaching NPR 277.03 billion, driven by higher demand and diversification in export products. Imports also increased, though at a more moderate pace of 13.3 percent, totaling NPR 1.804 trillion.

Overall, the NRB report suggests that Nepal’s economy is gradually gaining strength, supported by monetary easing, improving sectoral performance, and stable macroeconomic conditions. While challenges remain, especially in ensuring balanced regional growth and sustaining investment momentum, the outlook indicates a more resilient and growth-oriented economy compared to recent years.