Nepal economy grows 3.51% in Q3 of FY 2082/83, Driven by energy, finance and trade sectors

KATHMANDU: Nepal’s economy recorded a moderate expansion in the third quarter of the current fiscal year 2082/83 (2025/26), with the National Statistics Office estimating that the Gross Domestic Product (GDP) grew by 3.51 percent in real terms compared to the same period last year, according to the latest Quarterly National Accounts released for the period covering Magh, Falgun and Chaitra months.

The preliminary estimates, compiled using the 2010/11 base year under the national accounting framework, show that the country’s economic activity continued to expand across most sectors despite mixed performance in agriculture and manufacturing. The overall growth was primarily driven by strong expansion in electricity and gas supply, financial services, transportation, and wholesale and retail trade, while contraction in public administration and industrial production weighed on the broader momentum.

According to the report, the electricity, gas, steam and air conditioning supply sector emerged as the fastest-growing segment of the economy, expanding by 24.88 percent on a year-on-year basis. Financial and insurance activities followed with a growth rate of 10.27 percent, while transportation and storage increased by 7.83 percent. Wholesale and retail trade, including repair of motor vehicles and motorcycles, also recorded a solid growth of 5.25 percent, reflecting improved domestic demand and higher trade activity.

In contrast, manufacturing contracted by 0.54 percent, while public administration and defense declined by 1.59 percent, indicating weaker output in government-related services and industrial production. Despite these declines, 16 out of 18 major industrial categories registered positive growth during the quarter, suggesting a broadly expanding but uneven economic recovery pattern.

Agriculture, forestry and fishing—the largest sector in terms of economic contribution—grew by 1.58 percent year-on-year. The report notes that although paddy production declined during the review period, gains in livestock, vegetables, fruits, and forestry products helped sustain overall agricultural growth. The sector’s modest expansion reflects the continued vulnerability of Nepal’s agrarian base to seasonal fluctuations and productivity constraints.

The construction sector grew by 2.75 percent, supported by ongoing infrastructure projects and improved material supply conditions, particularly after earlier disruptions in bitumen imports. The report highlights that geopolitical tensions in West Asia had temporarily affected bitumen supply chains, slowing road construction activity, but the situation improved after coordination from the Ministry of Physical Infrastructure and Transport, allowing projects to regain momentum.

The accommodation and food services sector expanded by 1.72 percent, indicating gradual recovery in tourism-linked activities, while information and communication grew by 4.87 percent, reflecting sustained demand for digital services. Education and human health sectors posted moderate growth of 1.22 percent and 2.19 percent respectively, suggesting stable performance in social services.

On the demand side, wholesale and retail trade remained a key contributor to overall growth, supported by increased imports and domestic production of tradable goods. The financial sector’s double-digit growth was driven by increased deposit mobilization, improved credit flows, and higher non-life insurance premiums.

The report also highlights that electricity generation and distribution played a central role in boosting industrial output, with improved hydropower production and transmission capacity contributing significantly to value addition in the energy sector. This surge in electricity output has been identified as one of the most important structural drivers of quarterly growth.

In terms of seasonally adjusted estimates, which compare the third quarter with the immediate previous quarter (Q2 of FY 2082/83), GDP increased by 0.58 percent. This indicates a mild sequential growth trend, although at a slower pace compared to earlier quarters. The seasonally adjusted data shows that 11 out of 18 industrial groups recorded positive growth, while the remaining sectors experienced contraction.

Under the seasonally adjusted framework, electricity and gas again led growth with 6.87 percent expansion, followed by mining and quarrying at 2.23 percent and wholesale and retail trade at 2.02 percent. However, sectors such as accommodation and food services declined by 2.30 percent, financial and insurance activities fell by 1.07 percent, and manufacturing dropped by 0.83 percent, indicating volatility in certain service and industrial segments.

Agriculture, forestry and fishing, when adjusted for seasonal effects, showed a slight contraction of 0.04 percent compared to the previous quarter, highlighting the impact of seasonal agricultural cycles and output variability. Despite this, the sector remains the backbone of Nepal’s economy in terms of employment and livelihood dependency.

The total size of the economy in the third quarter at constant prices was estimated at NPR 630.82 billion under the unadjusted series, while the seasonally adjusted GDP stood at NPR 646.55 billion, reflecting differences in seasonal smoothing methodologies applied by statisticians.

According to the National Statistics Office, the quarterly estimates are produced using internationally accepted methodologies, including the IMF-recommended X-12 ARIMA model for seasonal adjustment. The system allows policymakers to better understand short-term economic movements, distinguish seasonal fluctuations from structural trends, and support evidence-based policy decisions.

The report notes that quarterly GDP compilation is based on multiple economic indicators, including production, consumption, investment, and sector-specific administrative data. It further emphasizes that such short-term estimates are crucial for monitoring economic performance between annual national accounts releases, which cannot capture intra-year fluctuations.

Over the past five years, Nepal’s quarterly growth performance has shown significant variability, with peak expansion observed in FY 2078/79 and relatively lower performance during FY 2079/80. The current data suggests a stabilizing trend with moderate growth levels returning across most sectors, although structural weaknesses persist in manufacturing and public administration.

The statistical office has also revised previous quarterly estimates based on updated sectoral data, ensuring improved accuracy and consistency across national accounts. Officials said such revisions are part of the standard practice to refine early estimates as more comprehensive data becomes available.

Overall, the third-quarter performance of FY 2082/83 indicates that Nepal’s economy is maintaining steady but moderate growth momentum, supported by energy production, financial services, trade, and transport activities. However, challenges remain in boosting industrial output, enhancing agricultural productivity, and sustaining consistent investment in key productive sectors.

As Nepal continues to pursue economic stability and higher growth targets, the quarterly data underscores the importance of infrastructure development, energy expansion, and financial sector strength in driving long-term economic transformation.