Nepal’s economy is showing mixed signals. While some debates warn of slowdown, recent data from Nepal Rastra Bank offers a brighter view. The country’s real economic growth for fiscal year 2081/82 is higher than the five-year average. The Central Bureau of Statistics estimated GDP growth at 4.61%, above the two-decade annual average.
Agriculture Gains, Industry and Services Slip
Agriculture contributed slightly more to GDP, rising from 24.71% to 25.16%. Meanwhile, industry and services saw small declines. Industry dropped to 12.83% and services to 62.01% of GDP.
Inflation Under Control
Despite slower wage growth, inflation remained moderate at 4.06%, down from 5.44% the previous year. Some provinces, like Koshi and Sudurpashchim, experienced slightly higher price pressures, but most regions stayed within limits.
Trade Deficit Remains High
Exports jumped 81.8% last year, mainly due to unusual growth in oil exports. Imports grew 13.3%, leaving the trade deficit at 25% of GDP.
Remittances Provide a Boost
Money sent home by Nepali workers abroad grew strongly. Total remittances reached NPR 17.23 trillion, almost 93% of the fiscal year’s budgeted revenue. Over 839,000 young Nepalese went abroad for work during this period. While remittances help the current account, heavy reliance on them could pose future risks.
Current Account and Forex Reserves Improve
Rising remittance inflows helped the current account, which saved NPR 4.09 trillion. Foreign exchange reserves also increased, reaching NPR 26.77 trillion by mid-July 2082, enough to cover 18.2 months of service imports and 15.4 months of goods and service imports.
Government Spending and Debt
Capital spending rose slightly to NPR 2.23 trillion. Revenue collection improved to NPR 11.96 trillion. The government also received foreign aid and took on domestic and foreign loans, increasing the debt burden.
Banking and Investment Trends
Deposits at banks and financial institutions grew by NPR 8.11 trillion, but loans only rose by NPR 4.24 trillion. This mismatch shows investment demand is still weak, despite moderate growth in money supply and stable interest rates around 8%.
The Takeaway
Nepal’s economy is slowly recovering, with strong remittance inflows and moderate growth. Yet high trade deficits and limited domestic investment highlight ongoing challenges. The picture is complex: progress in some areas, pressure in others, making careful policy decisions essential.
