The World Bank had earlier estimated the economic growth rate to be 5.2 percent in the current financial year and then 5.5 percent, the average economic growth rate of the South Asian region in the current financial year was projected to be 5.8 percent.
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The World Bank has predicted that the economic growth rate of Nepal will decrease due to the political situation. In the current fiscal year (2026), the economic growth rate of Nepal is expected to fall to 2.1 percent, according to the World Bank. The 'South Asia Development Update: Jobs, AI and Business' report published by the World Bank on Tuesday has predicted that the economic growth rate of Nepal will decrease in the current financial year.
The World Bank previously estimated the economic growth rate of 5.2 percent in the current financial year and 5.5 percent thereafter.
'Nepal experienced its worst unrest (movement) in decades in September. Bans on social media and anti-corruption protests turned into nationwide unrest, causing massive human and economic losses, the World Bank said. A new caretaker prime minister was appointed in September, whose aim is to prepare for the elections in March 2026.'
The World Bank said that the protest took place last September, especially due to the delay in government services and corruption among the youth. According to the report, the movement reflects the lack of economic opportunities among the youth, slowness in development, and rampant corruption. According to the report, the main reasons for youth dissatisfaction are private sector not being able to invest confidently, lack of investment environment in the country, increasing business uncertainty, increased transport and business costs and inadequate infrastructure.
Due to these reasons, the economic growth of Nepal is slow compared to other countries according to the World Bank. "From the fiscal year 2012 to 2024, the average economic growth rate of Nepal is only 4.3 percent," the report states, "employment creation was also limited." The unemployment rate reached nearly 22.7 percent in fiscal year 2023, one of the highest rates in South Asia.
Job shortages have made labor migration a major livelihood strategy, the report said. As the number of Nepalis going for foreign employment is increasing, there is also an increase in remittance inflow, according to which, it is said that remittances coming into Nepal have reached about a quarter of the gross domestic product (GDP). It is mentioned in the report that remittances are meeting the basic consumption of Nepali people.
Last year (year 2025), the economic growth rate of Nepal reached 4.6 percent. This is more than the previous financial year. The economic growth rate of Nepal in 2024 was 3.7 percent. According to the World Bank, economic growth at that time was supported by extensive progress in hydropower generation, revival in industrial production and improvement in agriculture. Experts say that due to the floods last year and this year, many hydropower projects were damaged and the infrastructure was destroyed.
The economic growth rate of Nepal projected by the World Bank this year is lower than other South Asian countries. The average economic growth rate of the South Asian region is projected to be 5.8 percent in the current financial year. This is also lower than the previous projection. Similarly, the economic growth rate of Bhutan is 7.3 percent, India is 6.5 percent, Bangladesh is 4.8 percent, Maldives is 3.9 percent and Sri Lanka is 3.5 percent.
Similarly, in 2027, the economic growth will rise again and will be 4.7 percent, according to the projection of the World Bank. Compared to other countries in South Asia, Nepal's position is weak. In 2026, India's economic growth rate is projected to be 6.5 percent, Bhutan's 7.3 percent, Bangladesh's 4.8 percent, Sri Lanka's 3.5 percent and Maldives' 3.9 percent. According to
analysts, weak private investment, weak revenue collection and political uncertainty may affect Nepal's long-term development goals. Similarly, the economic growth rate of South Asia in 2025 is estimated to be an average of 6.6 percent. But the World Bank has also worried that there will be a slowdown in economic activity in the coming months. However, reforms that promote trade openness and the use of technology will help create jobs and accelerate economic growth, the World Bank says. According to the
report, South Asia's economic growth is expected to drop to 5.8 percent in 2026. That is 0.6 percentage points lower than the forecast in April this year. The World Bank believes that the impact of the global economic slowdown, uncertainty regarding trade policies, regional socio-political instability and disruption of employment from new technologies such as artificial intelligence (AI) are the main risks in this sector.
South Asia has huge economic potential and is still the fastest growing region in the world. But countries must proactively address the risks that affect growth," said Johannes Jatt, Vice President of the World Bank's South Asia Department. "Countries can maximize the benefits of AI and reduce trade barriers, especially in intermediate goods, to increase productivity, encourage private investment, and create jobs for a rapidly growing labor force." The report also recommends using AI to increase productivity and income.
