Nepal’s economy expands moderately despite agricultural slowdown, External sector remains strong

KATHMANDU: The Government of Nepal has unveiled the Economic Survey 2082/83, presenting a mixed picture of the country’s economy—marked by moderate economic growth, a slowdown in agriculture, stronger external sector indicators, expanding digital financial access, and improved energy infrastructure.

Presented to the Federal Parliament by Finance Minister Swarnim Wagle, the survey projects Nepal’s economy to grow by 3.85 percent in the current fiscal year, lower than the 4.43 percent growth recorded last year, reflecting continued domestic economic sluggishness despite improvements in key macroeconomic indicators.

Economy Expands to NPR 66 Trillion

According to the survey, Nepal’s economy is projected to reach Rs 6.609 trillion (66 Kharba), with Bagmati Province contributing the largest share at 36.7 percent, while Karnali Province contributes the least at 4.2 percent.

The report highlights that Nepal remains a highly consumption-driven economy, with total consumption estimated to account for 90.3 percent of Gross Domestic Product (GDP) during the current fiscal year.

Per capita economic indicators have also improved:

• Per capita GDP: USD 1,513
• Per capita national income: USD 1,535
• Per capita disposable income: USD 2,055

Agriculture Slows Amid Drought and Unseasonal Rainfall

The survey identifies agriculture as one of the weakest-performing sectors this fiscal year.

Agricultural value-added growth is projected at only 1.58 percent, down sharply from 3.05 percent last fiscal year.

The slowdown was largely driven by a 4.16 percent decline in paddy production, mainly due to drought during plantation season in the Terai and excessive rainfall during harvest, which damaged crops.

Despite lower rice output, the sector avoided negative growth due to improvements in:

• Wheat production
• Maize production
• Millet cultivation
• Industrial crops
• Livestock output
• Winter crops and fruit farming

The survey estimates agriculture’s contribution to GDP at 24 percent, slightly lower than 24.5 percent last year, while the non-agriculture sector’s share is projected to rise to 76 percent.

Non-Agriculture Sector Drives Growth

Economic expansion has been supported mainly by the non-agriculture sector, which is expected to grow faster than agriculture, led by energy generation, services, banking, telecommunications, and infrastructure-related activities.

The government says continued legal, institutional, and policy reforms in financial and productive sectors are expected to further stimulate economic activity.

Electricity Access Nears Universal Coverage

Nepal’s power sector continued to emerge as a major growth driver.

The survey reports that 99.1 percent of the population now has access to electricity, including access through alternative energy systems.

Nepal’s total installed electricity capacity has reached 4,105 megawatts (MW), including:

• Hydropower: 3,798 MW
• Solar energy: 142 MW
• Alternative energy systems: 106.24 MW
• Thermal power: 53.4 MW
• Cogeneration from sugar mills: 6 MW

Electricity exports to India also expanded significantly.

By Falgun 2082, Nepal exported 2,918 gigawatt-hours (GWh) of electricity to India, according to the survey.

The report estimates an additional 666 MW will be added by the end of the fiscal year, raising Nepal’s total electricity capacity to approximately 4,626 MW.

Financial Sector Stable Despite Credit Pressure

The Economic Survey states that Nepal’s banking system remains broadly stable, with key indicators such as capital adequacy and liquidity ratios remaining above regulatory requirements.

As of Falgun 2082, Nepal had:

• 20 commercial banks
• 17 development banks
• 17 finance companies
• 51 microfinance institutions
• 1 infrastructure development bank

However, the report acknowledges that slow economic activity has reduced credit demand and increased pressure on loan quality.

Average non-performing loans (NPLs) rose from 4.92 percent in Poush 2081 to 5.42 percent in Poush 2082.

Private sector credit expanded by 6.7 percent by Falgun, slightly higher than 6.33 percent during the same period last year.

At the same time, higher remittance inflows and subdued domestic demand have resulted in excess liquidity within the banking system, helping lower interest rates.

The survey notes that average consumer inflation remained contained at 2.13 percent by Falgun, significantly below the monetary policy target of around 5 percent.

Foreign Exchange Position Strengthens

Nepal’s external sector remained strong during the review period.

Foreign exchange reserves were reported to be sufficient to cover 18.5 months of merchandise and service imports, significantly exceeding minimum adequacy thresholds.

The survey attributes the improvement partly to higher remittance inflows and a stable balance of payments position.

Digital Financial Access Expands Rapidly

The government says the use of digital and electronic banking services has continued to rise sharply.

By Falgun 2082:

• Deposit accounts reached 62.06 million
• Loan accounts stood at 2.04 million
• Mobile banking users rose to 29.46 million
• Internet banking users reached 2.374 million

To facilitate electronic transactions, Nepal currently has:

• 8 payment system operators
• 21 payment service providers

The survey says digital financial services are expanding rapidly due to improved digital infrastructure and greater public access to electronic payment systems.

Public Debt and Economic Outlook

The survey acknowledges continued fiscal pressure amid weak domestic economic activity, though the government remains optimistic about medium-term recovery through structural reforms, investment facilitation, digital transformation, and infrastructure expansion.

The government says policy priorities will focus on:

• Accelerating infrastructure projects
• Expanding energy exports
• Strengthening financial stability
• Improving investment climate
• Supporting digital transformation and financial inclusion

While the economy continues to face challenges from weak domestic demand and climate-related agricultural disruptions, the Economic Survey suggests Nepal’s macroeconomic fundamentals—particularly external reserves, inflation management, electricity generation, and financial access—remain relatively stable.