Looking ahead, reconstruction activities, continued hydropower expansion, and consumption linked to the 2027 subnational elections are expected to support a pickup in growth to an average of 4.4% over FY27–FY28.
Released on April 8, the Nepal Development Update, Growth Under Pressure: Navigating Domestic and Global Shocks, says that the services sector is expected to be most affected in FY26, due to slower tourism activity, higher transport costs, and potential supply chain disruptions. The outlook remains highly uncertain. A prolonged conflict in the Middle East could dampen tourist arrivals, reduce remittance inflows, weaken consumption, and slow overall economic activity. On the upside, improved political stability following the elections in March, sound macroeconomic management, the availability of ample buffers, and continued structural reforms could strengthen investor confidence, boosting private investment and growth.
“Boosting private sector-led growth will be critical to strengthening economic resilience and creating more jobs in Nepal,” said David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka. “To achieve this, Nepal must improve the business environment, develop foundational infrastructure, mobilize private finance, and support priority sectors such as tourism, the IT sector, and agribusiness.”
