World Bank expects Nepal’s economic rebound with 3.9% growth rate in FY2024

KATHMANDU: The World Bank, in conjunction with the Society of Economic Journalists Nepal (SEJON) and Kathmandu University, unveiled its South Asian Development Update and Nepal Development Update 2023, projecting a robust economic rebound for Nepal in the fiscal year 2024.

According to the reports, Nepal’s economy is expected to grow by 3.9% during this period. However, the growth rate for the current year will remain at 1.9%.

The projected rebound is attributed to several factors, including the removal of import restrictions, a significant uptick in tourism, and gradual monetary policy relaxation. Nepal’s economy is further estimated to expand by 5% in fiscal year 2025.

Nevertheless, the outlook carries certain risks, such as unpredictable monsoons affecting agricultural growth, potential spikes in commodity prices, continued food export bans by India, and higher inflation, which could impact policy rates and debt servicing costs.

Despite these challenges, Nepal’s economy is making progress, with an emphasis on green, resilient, and inclusive development.

To enhance external competitiveness and stimulate export markets, reforms are needed to boost domestic productivity and align inflation rates with trading partners. These reforms aim to support Nepal’s long-term economic recovery and help the nation graduate to developing country status.

The World Bank’s reports also highlight the importance of improving energy efficiency and adopting advanced energy-efficient technologies to achieve both environmental and economic goals in South Asia. However, fiscal constraints may hinder the region’s ability to fully capitalize on the global energy transition.

Furthermore, the energy transition is expected to impact South Asia’s labor markets, particularly those with pollution-intensive jobs.

The report suggests a range of policies to safeguard affected workers, including better access to education and training, financial support, improved markets, enhanced worker mobility, and strengthened social safety nets.

In response to these findings, economist Nayan Krishna Joshi emphasized Nepal’s significant progress across various sectors, including electricity exports to India and preparations for power export to Bangladesh.

However, challenges in the retail and wholesale trade have slowed the growth of the service sector in 2023. Joshi also noted that average consumer prices have reached a seven-year high, despite reduced imports and increased remittances, which have hit their lowest point in six years.

Dr. Ramesh Chandra Poudel of the National Planning Commission stressed the need for education reform in Nepal and improved coordination with the country’s school productivity to address these challenges effectively.