IMF and ADB express satisfaction over Nepal’s economic recovery
KATHMANDU, Sept 25: Two international organizations—International Monetary Fund (IMF) and Asian Development Bank (ADB)—have expressed satisfaction over the signs of recovery that Nepal’s economy is posting of late.
The ADB has estimated that Nepal’s economy will grow by 4.9 percent in 2025, up from an estimated 3.9 percent growth in 2024. Unveiling its flagship report ‘Asian Development Outlook,” on Wednesday, the international lending organization has come up with an encouraging figure for Nepal that has been reeling under economic slowdown for almost the past over a year.
Nepal's economy to grow by 4.9 percent in 2025: ADB
After the IMF team visited the Himalayan country to discuss recent macroeconomic developments and the implementation of the programs supported by the Extended Credit Facility, the international monetary watchdog also praised Nepal for moving into a recovery path. Incoming high-frequency data shows import growth is entering into positive territory, tax collections are improving, and public investment is picking up while credit growth is also recovering, the IMF stated in its report.
According to the ADB, the projected economic boost will be driven by several factors, including a gradual recovery in domestic services, increased infrastructure spending, and further revitalization of the tourism sector. "Gross domestic product growth will pick up as domestic demand recovers, infrastructure projects accelerate, and tourism continues to expand," said ADB Country Director for Nepal, Arnaud Cauchois.
As per the report, Nepal’s agriculture sector is poised to benefit from timely paddy planting and a favorable monsoon season, which will support strong harvests. Industrial growth is expected to rise, primarily due to increased electricity generation capacity, while the services sector will be bolstered by higher tourist arrivals, which will drive growth in accommodation, food services, and retail trade.
The recovery of domestic demand will be supported by a cautiously accommodative monetary policy and planned acceleration in capital spending, particularly on infrastructure. This will also strengthen wholesale and retail trade, transportation, storage, and real estate activities, further boosting the economy.
The ADB report notes that inflation in 2025 is expected to remain within the target set by Nepal Rastra Bank (NRB) of 5.0 percent. The inflation forecast assumes a normal harvest season and a modest decline in inflation rates in India, Nepal’s major trade partner and source of imports.
In terms of external risks, Nepal's trade deficit shrank in 2024, due to buoyant remittance inflows and an increase in tourist arrivals, leading to a surplus in the current account. However, as the economy continues to recover, the current account balance is projected to shift back to a deficit of about one percent of the GDP in 2025, from a surplus of 3.9 percent in 2024. This shift is attributed to a moderation in remittance inflows as economic conditions stabilize.
