Nepal’s economic growth is projected to slow to 2.3 percent in FY26, down from 4.6 percent in FY25, according to the World Bank’s latest Nepal Development Update. The slowdown is attributed to the ongoing conflict in the Middle East and the lingering effects of domestic unrest in September 2025. The services sector is expected to be most affected, with weaker tourism activity, higher transport costs, and potential supply chain disruptions weighing on overall performance. Despite the near-term challenges, growth is expected to recover to an average of 4.4 percent during FY27–FY28, supported by reconstruction efforts, hydropower expansion, and increased consumption linked to upcoming elections.
The report notes that the outlook remains highly uncertain, as a prolonged Middle East conflict could further reduce tourist arrivals, remittance inflows, and domestic consumption. However, improvements in political stability, sound macroeconomic management, and structural reforms could help restore investor confidence and support private investment. The World Bank emphasizes the importance of strengthening the business environment, expanding infrastructure, mobilizing private finance, and supporting key sectors such as tourism, information technology, and agribusiness to drive sustainable job creation and long-term growth.
