Economy and Business

World Bank projects Nepal's economic growth to accelerate to 5.1% in FY 2025


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KATHMANDU: According to the World Bank's most recent research, "Nepal Development Update: International Migration and Well-being in Nepal," the country's GDP is predicted to increase by 5.1 percent in the fiscal year 2025, up from 3.9 percent the year before. The primary forces behind this predicted development, according to the research, are rising visitor numbers, hydropower production, and rice yields.


The private sector is expected to contribute significantly when the central bank loosens its monetary policies and regulations. It is anticipated that this easing will stimulate economic growth by encouraging business expansion and enhancing the climate for investments.


The economy is expected to grow even further, with a 5.5% growth rate predicted for FY 2026. However, the paper also identifies a number of concerns, such as financial system weaknesses, that could jeopardize this estimate. Growing non-performing debt may impede the expansion of credit in the private sector, which would be detrimental to the health of the economy as a whole.


Investments are really at risk from policy inconsistencies in addition to financial risks. Delays in capital expenditures can impede growth, especially when it comes to the execution of infrastructure development projects. Regional instability can also be detrimental to economic prospects, especially if it affects tourism and local demand.


The National Planning Commission's Vice Chairman, Prof. Dr. Shiva Raj Adhikari, stated that "Nepal's economy is on a gradual recovery path." In order to improve productivity and strengthen macroeconomic stability, he underlined the government's priority on increasing capital expenditure through the completion of nearly completed projects and budgetary process reforms.


Another potential challenge to economic growth is external shocks, especially in migrant-receiving countries such as those in the Gulf Cooperation Council and Malaysia. These shocks could impact international remittances, which are critical for household consumption, poverty alleviation, and human capital development in Nepal.


The paper notes that although migration abroad provides Nepal with a lot of chances, it also has a lot of expenses and difficulties. The overall advantages of migration may be limited by the challenges that migrant workers frequently experience, such as expensive recruitment costs and hazardous working conditions.


The paper shows the necessity for focused policy measures to optimize the benefits of migration. In order to assure long-term skill development, increase migrant safety, and foster transparency, major reforms should work toward developing an inclusive migration management system.


"Maintaining growth momentum is crucial for Nepal's development," said David Sislen, the World Bank's Country Director for the Maldives, Nepal, and Sri Lanka. He reminded us that sustained prosperity in the economy depends on continuous advancements in key areas like infrastructure, governance, and human capital development.


Establishing an atmosphere that promotes involvement from the private sector is also essential. In order to guarantee that companies can prosper and contribute to the development of the country, Sislen emphasized the significance of assisting the private sector through pro-business legislation and regulatory changes.


A system of inclusive migration management could assist in addressing the difficulties experienced by migrants from Nepal. An open hiring procedure would be guaranteed by such a system, which would also help immigrants become more employable overseas and increase their safety and mobility in international labor markets.


The system should also promote destination diversity and long-term skill development, which will aid migrants in finding better opportunities overseas and advance Nepal's economy.


The World Bank publishes a biennial 'Nepal Development Update' that offers a thorough examination of the major economic advancements that have occurred during the previous year. It provides insights into the present and future economic environment of Nepal by placing these patterns in a longer-term, global context.


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