KATHMANDU, April 10 (Xinhua) -- Nepal's economy is forecast to grow by 2.7 percent in the current fiscal year 2025-26, down from 4.6 percent in fiscal year 2024-25, due to the impact of last year's civil unrest and the Middle East conflict, the Asian Development Bank said on Friday.
Nepal's current fiscal year runs from mid-July 2025 to mid-July 2026.
The Middle East conflict poses significant downside risks to Nepal's economy through rising global oil prices, declining tourist arrivals, and a potential drop in remittances, particularly from Gulf Cooperation Council (GCC) countries, which account for around 40 percent of Nepal's total remittance inflows, the ADB said in its flagship economic publication, the Asian Development Outlook April 2026.
"While renewed political stability is expected to support reforms and bolster economic confidence, substantial downside risks remain, particularly from the Middle East conflict, which is affecting oil prices, tourism, and remittance flows," ADB's Country Director for Nepal Arnaud Cauchois said.
According to the report, the Himalayan country is expected to see a deceleration in growth across the agriculture, industry, and services sectors in the current fiscal year.
Agricultural growth is expected to slow to 2.7 percent in the current fiscal year from 3.3 percent in the last fiscal year, while industry growth is estimated to fall to 2.8 percent from 4.5 percent over the same period.
The services sector is also projected to slow, with growth expected to decline to 2.8 percent from 4.2 percent in the previous fiscal year.
The decline in paddy production, caused by delayed monsoon rains and floods in October 2025, is expected to contribute to the slowdown in the agricultural sector, while weaker investor sentiment and delayed capital spending are weighing on manufacturing and construction.
Weaker performance in wholesale and retail trade, sluggish real estate activity, and the impact of the Middle East conflict on tourism are expected to hit the services sector, according to the report.
Nepal's inflation is projected to increase in the current fiscal year, reversing earlier expectations, as rising global energy prices driven by the Middle East conflict push up domestic costs. ■
