KATHMANDU: The Asian Development Bank (ADB) has forecasted a 3.6% growth for Nepal’s economy in fiscal year 2024, a significant rise from the estimated 1.9% growth in fiscal year 2023.

During a press conference held today to launch the Asian Development Outlook (ADO) April 2024, a flagship publication of the ADB, the organization shared insights into Nepal’s economic trajectory.

According to Arnaud Cauchois, ADB Country Director for Nepal, a gradual easing of monetary policy, alongside enhanced consumer and investor confidence, is anticipated to stimulate economic activity in 2024.

Moreover, the industrial sector is projected to experience faster growth compared to fiscal year 2023, driven by increased government capital spending and the addition of new hydroelectric power capacity by the end of fiscal year 2024.

The service sector is also expected to see accelerated growth as credit restrictions ease, interest rates decrease, and tourism revenues expand.

However, agricultural growth may only marginally increase from 2.7% to 2.8%, as a robust rice harvest is offset by lower winter crop yields and other agricultural challenges due to inadequate winter rainfall.

The report forecasts a reduction in annual average inflation to 6.5% in fiscal year 2024 from 7.7% in fiscal year 2023, attributed to subdued oil prices and decreased inflation in India, Nepal’s primary import source.

Despite relatively contained external risks, the ADB clarified that the current account deficit might return after registering a surplus in the first half of fiscal year 2024.

The contraction of the trade deficit and a substantial increase in workers’ remittances contributed to a surplus of $1.2 billion in the current account.

However, with higher imports and stable remittance inflows expected in the latter part of the fiscal year, the 2024 current account deficit is projected at 0.7% of gross domestic product.

ADB Principal Economist for Nepal, Jan Hansen, highlighted potential downside risks to the economic outlook, including a global economic downturn affecting Nepal’s tourism and remittances, as well as geopolitical unrest disrupting supply chains and impacting global inflation.

Hansen affirmed ADB’s commitment to supporting Nepal’s prosperity and inclusivity.

Established in 1966 and owned by 68 members, 49 from the region, ADB remains dedicated to achieving a prosperous, inclusive, resilient, and sustainable Asia-Pacific region while eradicating extreme poverty.