Nepal’s economy has recorded a notable growth rate of 4.61 percent in the fiscal year 2024/25, according to the latest Current Macroeconomic and Financial Situation Report released by the Nepal Rastra Bank (NRB). The report, covering the 12 months of the fiscal year ending in mid-July 2025, highlights progress across major sectors of the economy, a decline in inflation, and improvements in external sector performance.
Sectoral Growth Breakdown
The growth figures indicate a broad-based expansion across agriculture, industry, and services:
Agriculture: Grew by 3.28 percent, driven by improved paddy and maize production, along with livestock and dairy contributions. However, challenges remain due to irregular rainfall patterns and limited modernization in farming practices.
Industry: Expanded by 4.53 percent, supported by manufacturing, construction, and hydropower development. The industrial sector benefitted from relatively stable power supply and rising domestic demand, though import dependence for raw materials continues to weigh heavily.
Services: Increased by 4.21 percent, with transport, communication, wholesale and retail trade, and tourism-related activities contributing to growth. The rebound in tourist arrivals post-pandemic has particularly helped hotels and restaurants register positive growth momentum.
Inflation at a Three-Year Low
One of the most encouraging indicators from the report on Nepal’s economy is the decline in inflation. The annual average consumer price inflation fell to 4.06 percent, compared to 5.44 percent a year earlier. This marks the lowest inflation level in three years.
According to NRB, food and beverage prices rose by 5.38 percent, while non-food and service inflation moderated to 3.11 percent. Controlled inflation has provided some relief to households struggling with high living costs, though prices of essentials such as vegetables, dairy, and petroleum products remain sensitive to supply fluctuations.
External Sector Performance
The report on Nepal’s economy underscores a significant turnaround in Nepal’s external sector:
Balance of Payments (BoP): Surplus of Rs. 594.52 billion, compared to Rs. 290.52 billion in the previous fiscal year.
Current Account Deficit: Narrowed sharply to Rs. 63.37 billion, from Rs. 401.44 billion in FY 2023/24.
Remittances: Increased by 19.2 percent, reaching Rs. 1.46 trillion. This strong inflow has been a crucial driver of the BoP surplus.
Foreign Exchange Reserves: Rose to USD 19.52 billion, enough to cover 15.4 months of imports. This is a substantial improvement in Nepal’s external stability.
The surge in remittances reflects the continued reliance of the Nepali economy on its migrant workforce, primarily in Gulf countries and Malaysia. While this provides short-term stability, economists caution that long-term growth requires strengthening domestic industries and job creation.
Trade Dynamics
Trade performance showed a mixed picture:
Exports: Rose by an impressive 81.8 percent, reaching Rs. 173.34 billion, largely due to re-exports and some industrial products.
Imports: Increased by 13.3 percent, totaling Rs. 1.49 trillion. Despite the rise, the trade deficit narrowed to Rs. 1.32 trillion, compared to Rs. 1.44 trillion the year before.
Major export items included refined palm oil, soybean oil, carpets, textiles, and handicrafts, while imports were dominated by petroleum products, machinery, vehicles, and electronic goods.
Government Revenue and Expenditure
The government’s revenue mobilization remained below expectations. While overall revenue collection improved compared to the pandemic-hit years, Nepal continues to face challenges in broadening its tax base, reducing leakages, and ensuring fiscal discipline. Capital expenditure, in particular, was lower than targeted, raising concerns about project implementation capacity.
Outlook and Challenges
The 4.61 percent growth figure demonstrates a moderate recovery in the Nepali economy, supported by improved external indicators and lower inflation. However, several challenges remain:
Dependence on Remittances: While remittance inflows are strong, heavy reliance on migrant labor poses long-term risks. Domestic job creation and industrial growth are essential for sustainable development.
Agricultural Productivity: The agriculture sector still suffers from traditional farming methods, lack of irrigation, and climate change effects, limiting its potential.
Private Investment: Domestic and foreign direct investment remain low, hindered by bureaucratic hurdles, inconsistent policies, and political instability.
Rising Imports: Although exports improved, Nepal’s import dependency continues to strain the economy, especially in energy and manufacturing inputs.
Implementation Gap: Government capital spending remains weak, with many infrastructure and development projects delayed or incomplete.
Conclusion
Nepal’s economy and performance in FY 2024/25 reflects resilience and cautious optimism. The combination of growth above 4 percent, falling inflation, a robust remittance-driven BoP surplus, and increased forex reserves indicates a more stable macroeconomic environment compared to previous years.
However, sustaining this momentum will require structural reforms, improved investment climate, and stronger domestic production. Without addressing long-term weaknesses, especially in agriculture and industry, Nepal’s growth may remain vulnerable to external shocks and cyclical fluctuations.
For now, the positive indicators offer the government and private sector an opportunity to push forward reforms that can ensure more inclusive and sustainable growth in the years ahead.
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