KATHMANDU, Dec. 11 (Xinhua) -- Nepal's economy is projected to see a substantial downturn in the current fiscal year, reflecting weaker performance across key sectors, the Asian Development Bank (ADB) said in its latest report on Nepal's economy.
The Nepal: Macroeconomic Update, released by the ADB on Thursday, projected Nepal's GDP growth to slow to 3 percent in fiscal year 2025-26, which began in mid-July, down from 4.6 percent growth in fiscal year 2024-25.
The Nepali government has targeted a 6 percent growth for the current fiscal year. However, both the government and international agencies now project lower growth amid political uncertainty following the unrest in September.
The ADB cited the impact of the delayed monsoon and early-October floods on agriculture, as well as a deteriorating investment climate since the political unrest in early September, which caused extensive property damage and affected the non-agriculture sector.
"Overall, growth in fiscal year 2025-26 will be constrained by climate shocks, slower agriculture, and subdued industrial and services growth momentum," the ADB said in its report.
Agriculture growth sector is expected to ease to 2.9 percent as the delayed monsoon in the southern Madhesh Province and the flood damage in October will reduce paddy output and disrupt food supply chains. The agriculture sector had grown by 3.3 percent last year.
Industry growth will moderate to 4.0 percent, down from 4.5 percent last year, with electricity expansion slightly affected by temporary flood-related disruptions to hydropower plants, although the sector's resilience has limited long-term impacts.
Growth of the manufacturing sector is set to weaken sharply to 1.7 percent, from 3.8 percent a year earlier, weighed down by political instability, according to the ADB. Services growth is expected to decline to 3.1 percent from 4.2 percent a year earlier, due to a slowdown in wholesale and retail trade as consumers adopt a more cautious spending approach.
Nepal's central bank acknowledged earlier this month that the country would not be able to achieve its targeted economic growth for the current fiscal year, citing the delayed monsoon and crop damage, along with flood and landslide related disruptions in other sectors.
In November, the World Bank projected that Nepal's economic growth would slow significantly to 2.1 percent in the current fiscal year, reflecting the impact of public unrest in September and the resulting political instability. ■