Nepal’s growth to slow to 2.3% in FY26 amid global shocks: World Bank

Nepal’s economic growth is projected to slow sharply to 2.3% in fiscal year 2025/26, down from 4.6% the previous year, as global shocks and domestic disruptions weigh on the economy, according to the World Bank.

In its latest Nepal Development Update, released on April 8, the World Bank said the slowdown reflects the impact of the ongoing conflict in West Asia and the lingering effects of unrest in September 2025, both of which have dampened economic activity.

The report, titled Growth Under Pressure: Navigating Domestic and Global Shocks, identifies the services sector as the hardest hit. Slower tourist arrivals, rising transport costs, and potential supply chain disruptions are expected to constrain growth through FY26.

The outlook, the Bank warned, remains “highly uncertain.”

A prolonged conflict in West Asia could further reduce remittance inflows, weaken consumption, and slow overall economic activity. Tourism, a key pillar of the country’s services-led economy, could also face continued headwinds.

However, the report points to a possible recovery beginning FY27.

Reconstruction activity, continued expansion in hydropower, and consumption linked to the 2027 subnational elections are expected to support a rebound, with growth projected to average 4.4% over FY27–FY28.

“Boosting private sector-led growth will be critical to strengthening economic resilience and creating more jobs in Nepal,” said David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka. He called for improvements in the business environment, infrastructure development, and greater mobilisation of private finance, particularly in sectors such as tourism, information technology, and agribusiness.

The Nepal report accompanies the World Bank’s regional South Asia Economic Update, which projects growth in South Asia to slow to 6.3% in 2026, from 7% in 2025, largely due to disruptions in global energy markets.