By A Staff Reporter,Kathmandu, Apr. 12: The Asian Development Bank (ADB) has projected that Nepal’s economy will grow by 3.6 per cent in the current fiscal year 2023/24. 

Nepal’s economy is expected to grow by 3.6 per cent at market prices in fiscal year  2024, up from an estimated growth of 1.9 per cent in fiscal year 2023, according to the latest Asian Development Outlook (ADO) April 2024, a flagship publication of the Asian Development Bank (ADB) made public Thursday. 

“A gradual relaxation of monetary policy coupled with improved consumer and investor confidence is expected to stimulate economic activity in FY2024. Moreover, industry is projected to grow more rapidly than in FY2023 as capital spending by the government ramps up in the second half of the fiscal year, and as additional hydroelectricity power comes online by the end of FY2024,” said ADB Country Director for Nepal Arnaud Cauchois.  

Service sector growth will also likely accelerate as credit controls ease, interest rates further decrease, and tourism revenues expand. 

Agriculture growth may increase marginally from 2.7 per cent in FY 2023 to 2.8 per cent as a record rice harvest is tempered by a shortfall in winter crops and other agricultural production, given the scanty rainfall this winter season. 

The report projects annual average inflation to fall to 6.5 per cent in FY 2024 from 7.7 per cent in FY 2023 on subdued oil prices and a decline in inflation in India, Nepal’s main import source.  

External risks remain relatively well contained, said the report. 

The current account may fall again into deficit after registering a surplus in the first half of FY 2024. As the trade deficit contracted by 4.7 per cent year-on-year in the first six months of FY 2024, and as workers’ remittances expanded by 22.6 per cent year-on-year, the current account recorded a surplus of $1.2 billion. 

However, amid higher imports and stable remittance inflows in the remainder of the fiscal year, the FY 2024 current account deficit is forecast at 0.7 per cent of gross domestic product.  

“Downside risks to the economic outlook in FY 2024 may arise from a downturn in the global economy affecting Nepal’s tourism and remittance receipts,” said ADB Principal Economist for Nepal Jan Hansen.  

Any intensified geopolitical turmoil could disrupt supply chains, pushing up global inflation and tightening global financial conditions. This may lead to a tightening of domestic monetary policy, undermining investment and consumption, and dragging down growth.  

Earlier, the World Bank (WB) made public its estimation that Nepal’s economy is expected to grow by 3.3 per cent in FY 24, driven by revived tourism and a pickup in hydropower exports. 

Similarly, developing economies in Asia and the Pacific are forecast to expand by 4.9 per cent on average this year as the region continues its resilient growth amid robust domestic demand, improving semiconductor exports, and recovering tourism.

The growth will continue at the same rate next year, according to the ADO April 2024, released by the Asian Development Bank (ADB). 

Inflation is expected to moderate in 2024 and 2025, after being pushed up by higher food prices in many economies over the past two years.

Stronger growth in South and Southeast Asia—fueled by both domestic demand and exports—is offsetting a slowdown in the People’s Republic of China (PRC) caused by weakness in the property market and subdued consumption. 

The PRC’s growth is forecast to slow to 4.8 per cent this year and 4.5 per cent next year, from 5.2 per cent last year, said ADB.

India is expected to remain a major growth engine in Asia and the Pacific, with a 7 per cent expansion this year and 7.2 per cent next year.