The Asian Development Bank (ADB) has said Nepal would witness economic improvement next year.
Nepal’s economy is anticipated to grow by 4.3 percent at market prices in fiscal year 2024, up from an estimated growth of 1.9 percent in the fiscal year 2023, according to the recent Asian Development Outlook. The Outlook is ADB's flagship publication.
"With moderation in inflation and comfortable foreign exchange reserves, the Nepal Rastra Bank adjusted its monetary policy stance by lowering the policy rate by 50 basis points to 6.5 percent, which is expected to help lower commercial interest rates and stimulate economic activities. Services are expected to perform well with expansions coming from real estate, wholesale and retail trade and accommodation and food services," said the press statement issued by ADB on September 20.
Agriculture growth may however decline owing to inadequate rainfall in June and erratic weather patterns, further aggravated by lumpy skin outbreak in cattle, it stated.
Moreover, the report projects annual average inflation to fall to 6.2 percent in fiscal year 2024 from 7.7 percent in fiscal year 2023 on subdued oil price increases and a decline in inflation in India, Nepal’s main source of import.
“Despite some progress in restoring price and external sector stability, fiscal challenges persist. While the estimated fiscal deficit for fiscal year 2024 is moderate at 2.4 percent of GDP, much lower than the deficit of 6.1 percent in fiscal year 2023, the actual deficit could be substantially higher if the government does not meet its ambitious revenue target for fiscal year 2024,” said ADB Principal Economist for Nepal, Jan Hansen.
It has further observed that external risks remain relatively well contained. Considering the recent trends and the central bank’s prudent monetary policy stance, the target of maintaining foreign exchange reserves sufficient to sustain at least seven months of imports seems achievable.