ADB sees Nepal growth outlook to 3.9% in 2026, 4.5% in 2027, below government’s target

Nepal’s economic growth is expected to slow to 3.9% in 2026, according to the latest projection from the Asian Development Bank (ADB), highlighting a significant gap between international assessments and the government’s ambitious growth target.

In its latest Asian Development Outlook (ADO) July 2026, the ADB estimates that Nepal’s economy will grow by 4.4% in 2025 before slowing to 3.9% in 2026 and recovering slightly to 4.5% in 2027. The bank linked the slowdown to weaker regional growth and risks from the Middle East conflict.

The latest forecast is well below the Nepal government’s target of achieving 7% economic growth in the upcoming fiscal year. Nepal Rastra Bank has also set a 7% growth objective through its recently issued monetary policy.

Meanwhile, ADB has raised the growth forecast for the current fiscal year, citing stronger industrial activity driven by hydropower projects. ADB revised GDP growth forecast for fiscal year 2025/26 upward to 3.9% from the 2.7% projected in April. The revision reflects improved industrial performance, particularly from hydropower development.

The ADB’s revised estimate is slightly higher than the government’s latest projection. The government had lowered its growth forecast for the current fiscal year to 3.5% during the mid-year budget review, down from the original target of 6%. The National Statistics Office (NSO) has estimated Nepal’s GDP growth at 3.85% for the fiscal year.

Read also: IMF projects 4.6% growth for 2026/27, contrasts government’s 7% target

However, the ADB lowered the growth forecast for 2027 to 4.5%, down from the 5% projected in April. 

The latest forecast for the upcoming fiscal year remains significantly below the government’s ambitious target of achieving 7% economic growth in the upcoming fiscal year. Nepal Rastra Bank has also set its monetary policy around supporting the 7% growth objective while maintaining price stability.

The ADB outlook is consistent with the cautious assessment of other international agencies. The International Monetary Fund (IMF) has projected Nepal’s growth at 4.6% for FY 2026/27, also below the government’s 7% target, citing weak private investment, structural constraints, and challenges in public investment execution.

The ADB also revised Nepal’s inflation outlook, lowering its forecast for the current fiscal year to 3.2% from 3.7% due to improved agricultural supply and lower food prices. For the next fiscal year, it raised the inflation forecast to 5% from 4.5%, citing higher fuel prices, fiscal expansion, and stronger domestic demand.

Both ADB and IMF projections point to a slower growth path than the government’s estimates, suggesting that achieving higher growth will depend on stronger investment, improved implementation capacity, and progress in economic reforms.