The Asian Development Bank (ADB) has projected Nepal's economic growth rate to shrink to 2.7 percent in 2026. The bank had estimated economic growth of 4.6 percent in the previous fiscal year 2025. The ADB has concluded that the economy will slow down this year due to the Gen-G uprising last Bhadra and the conflict in West Asia. 

The ADB, releasing its economic publication 'Asian Development Outlook' on Friday, estimated that the inflation rate in 2026 will be around 3.7 percent, the growth rate of remittance inflows and exports will decrease, and the current account balance will be limited to 5.3 percent of the gross domestic product (GDP). 

The overall economic growth is expected to fall to 2.7 percent this year as the growth rate of the agriculture, industry and services sectors is expected to remain slow, said ADB economist Manbar Khadka. 'The growth rate of the agriculture sector is expected to be limited to 2.7 percent due to the floods last October and the decline in rice production,' he said. 

Tensions in West Asia due to the US/Israel-Iran war have led to a rise in oil prices, which has led to an increase in fuel and transportation costs in Nepal, according to an ADB report. The war has also increased risks to Nepal's remittance and tourism sectors, according to the ADB. Even if a two-week ceasefire is agreed, if the conflict is prolonged, it is believed that the economies of the Gulf countries will weaken, reducing demand for Nepali workers and reducing the growth rate of remittances. Nearly 40 percent of Nepal's total remittances come from countries affiliated to the Gulf Coordination Council (GCC). 

Arno Koswa, ADB's Country Director for Nepal, commented that Nepal's current economic structure, which is based on remittances, is not conducive to sustainable economic development. ‘The private sector should be encouraged by changing the structure of the economy to create jobs for the approximately 500,000 youth who enter the labor market every day,’ he said. ‘It could be an opportunity for Nepal to use the skills and capital of skilled manpower returning from abroad to develop the country.’ 

Nepal is completely dependent on energy imports, so price increases in the global market directly affect Nepal’s economy,  economist Khadka analyzed. Petroleum products account for about 16 percent of total imports in Nepal. ‘Due to the conflict in West Asia, the price of petrol has recently increased by up to Rs 45 per liter,’ he said. ‘This has also increased the cost of domestic transportation, food items, and services.’

If political stability remains and the conflict in West Asia subsides, the ADB expects the economic growth rate to reach 5 percent again in the upcoming fiscal year 2027. The ADB has mentioned that if the 100-point reform program put forward by the government is implemented effectively, the morale of the private sector will increase. However, the ADB has pointed out that the weak capital spending situation and the risks of climate change remain a constant challenge for Nepal's economic outlook.

ADB Country Director for Nepal, Koswa, expressed confidence that political stability will support the implementation of economic reform programs and increase investor and private sector confidence in the economy.