The World Bank has cautioned that Nepal's growth will continue to be stagnant at approximately 4% in the foreseeable future if remedial actions are not taken in a drastic manner. When the Nepali economy is already slowing down, the World Bank is predicting a gloomy picture in its latest report entitled "Unlocking Nepal's Growth Potential: Nepal Country Economic Memorandum 2025," which featured its projection on Nepal. The global lending agency also asserts that Nepal may be unable to meet the targets and fall below 4%, while the government has announced a high target of 7.1 percent annual growth by 2029 based on its 16th periodic plan. According to the World Bank, remittances, which contribute approximately 25% to the country's GDP, have been crucial to Nepal tackling poverty alleviation and maintaining household incomes at a desired level for the past several years. But relying on remittances and an import-based revenue economy does not augur well for the country's plan to diversify its economy. The bank's report further highlights if the country's fragile economic status remains unchanged, Nepal will fall behind her neighbors and other nations in terms of economic growth. While remittances have contributed to poverty reduction, they have generated a dependency, which has stifled employment and industrial expansion because of the outmigration of the Nepali workforce.
In addition, the manufacturing sector, which was once a significant growth driver of employment and exports, has been shrinking. The nation is not competitive in international markets with its low export base, composed of low-value products. Nepal's energy sector remains underutilized, while regulatory impediments and sluggish project development have kept the hydropower industry from becoming a major economic driver, in spite of its enormous potential. Likewise, the tourism industry, where there is high potential for the generation of employment and forex inflow, is underdeveloped due to inefficient marketing strategies, absence of infrastructure, and bureaucratic red tape that scares away would-be investors. Due to the absence of infrastructure and low levels of digital literacy, digital transformation has become slow, hampering the capacity of Nepal to compete with the new, vibrant economy of other nations.
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To solve these problems, the World Bank recommends that Nepal implement structural reforms. Developing more infrastructure, creating a more business-friendly regulatory environment, and increasing workforce productivity by investing in education and training are some of the important recommendations from the international financial institution. Investment attraction can be carried out, the World Bank asserts, through encouraging private sector development with streamlined rules. Rapid growth of industries such as manufacturing, tourism, and technology to diversify the economy is another important requirement to boost the slowed economy. Policymakers in Nepal should make long-term economic sustainability their priority. Investment in energy infrastructure and efficient use of hydropower can result in consistent revenue and reduced import dependence. Similarly, domestic entrepreneurship-friendly policies, reduction in import dependence, and increase in agricultural production should be prioritized by the government. Establishing robust financial institutions and providing sufficient finance to small and medium enterprises are also required. The country will experience long-term stagnation in the economy if the above-mentioned measures are not adopted in time. Nepal can realize its long-term growth if the right approach to enacting and implementing policies and investments in the right sectors is made while putting the highest priority on structural reforms. It would not be an easy ride to gain wealth, but Nepal, with vision and determination, could transform its economy and secure a brighter future for its citizens.