Nepal’s unemployment rate shows limited improvement over a decade, Raising concerns for economic growth

KATHMANDU: Nepal’s unemployment rate has remained stubbornly high over the past decade, highlighting deep structural weaknesses in the country’s economy and raising concerns about job creation, productivity, and long-term economic growth.

Data from the World Bank show that unemployment in Nepal has fluctuated only slightly between 2015 and 2024, with a sharp spike during the COVID-19 period and only marginal recovery afterward.

According to the data, Nepal’s unemployment rate stood at 10.6 percent in 2015. It rose to 10.7 percent in 2016 and remained at the same level in 2017. In 2018, unemployment slightly declined to 10.6 percent and further eased to 10.4 percent in 2019.

However, the situation worsened significantly in 2020, when the unemployment rate jumped to 13 percent as the COVID-19 pandemic disrupted economic activity, tourism, trade, and domestic employment.

In 2021, unemployment remained elevated at 12.2 percent, reflecting the slow pace of economic recovery. Although the rate gradually declined in subsequent years—10.8 percent in 2022, 10.6 percent in 2023, and 10.7 percent in 2024—it has failed to return to a clearly improving trend.

The data suggest that Nepal has been unable to generate sufficient jobs even during periods of relative economic stability.

Economists say this persistent unemployment rate is a clear signal that Nepal’s economic structure is not producing enough productive employment opportunities, especially for young people entering the labor market each year.

Every year, hundreds of thousands of youths join the workforce, but domestic job creation has not kept pace with this growing labor supply.

The impact of high unemployment on Nepal’s economy is wide-ranging. One of the most visible effects is the country’s heavy dependence on foreign employment.

With limited opportunities at home, many Nepali workers migrate abroad, particularly to Gulf countries, Malaysia, and increasingly to developed economies.

While remittances sent by migrant workers have become a backbone of Nepal’s economy, supporting foreign exchange reserves and household consumption, experts warn that this model is not sustainable in the long run.

High unemployment also affects domestic demand. When a large portion of the labor force remains unemployed or underemployed, household income growth remains weak.

This limits consumer spending, which in turn slows business expansion, investment, and overall economic activity. As a result, Nepal’s economy often struggles to achieve high and inclusive growth despite periods of political stability or favorable external conditions.

The banking and financial sector is also indirectly affected by unemployment trends. Lower employment means weaker credit demand, as households and businesses are less confident about borrowing and investing.

This has been evident in recent years, when banks in Nepal have reported excess liquidity but weak loan demand. Without strong job creation and income growth, economic confidence remains low.

The COVID-19 shock in 2020 clearly exposed Nepal’s economic vulnerabilities. The sudden jump in unemployment to 13 percent reflected widespread job losses in tourism, hospitality, transportation, construction, and informal sectors.

Although economic activity resumed after the pandemic, the slow decline in unemployment since then suggests that many jobs lost during the crisis were not fully restored.

Another major concern is youth unemployment. While the World Bank data reflect overall unemployment, experts note that joblessness among young people is significantly higher than the national average.

This has social as well as economic consequences, including rising frustration, brain drain, and declining trust in political and economic institutions.

Structural problems continue to limit job creation in Nepal. These include low industrial growth, weak manufacturing, limited value addition in agriculture, and slow implementation of infrastructure projects.

Despite repeated policy commitments, Nepal has struggled to attract large-scale foreign direct investment (FDI) that could generate employment and transfer skills and technology.

Policy uncertainty, regulatory bottlenecks, and frequent political changes have further discouraged private investment.

Small and medium enterprises, which are key sources of employment, often face difficulties related to financing, taxation, and market access. As a result, many businesses remain small, informal, and unable to absorb a growing workforce.

Economists argue that reducing unemployment requires a strong focus on economic reform rather than short-term populist measures.

Expanding infrastructure projects, promoting manufacturing and agro-processing, supporting tourism recovery, and encouraging private-sector-led growth are seen as essential steps.

Equally important is improving the education and skills system to align the workforce with market needs.

The unemployment data from 2015 to 2024 underline a critical message: Nepal’s economy has not been able to translate growth into jobs.

Without a clear shift toward job-centric economic policies, the country risks remaining trapped in a cycle of low employment, high migration, and slow productivity growth.

As Nepal prepares for future elections and economic policy debates, unemployment is likely to remain a central issue.

The challenge for policymakers is not only to reduce the unemployment rate on paper, but to create stable, productive, and dignified jobs that can sustain long-term economic development and restore confidence in Nepal’s economic future.