Kathmandu. The Asian Development Bank (ADB) has projected that Nepal’s economic growth will slow to 2.7 percent by 2026. According to the ADB’s ‘Asian Development Outlook April 2026’, the Asian Development Index (ADB) has reduced the rate to 4.6 percent in the previous fiscal year.

According to ADB Country Director for Nepal, Arno Kossova, political uncertainty, the Jenzi agitation in August and the ongoing conflict in the Middle East are the reasons for slowing economic growth. Stating that political stability would help move ahead with reform programmes and boost economic confidence, he said the impact of the Middle East conflict on oil prices, tourism and remittances still pose risks.

According to the report, the economic growth rate is expected to reach 5 percent in the next fiscal year. Improvement in domestic demand, increase in hydropower exports and revival of tourism sector are expected to support the economy.

According to the ADB, the inflation rate is projected to be 3.7 percent in the fiscal year 2082/83 and will increase to 4.5 percent in 2083/84. With the expansion of domestic economic activities, there will be further pressure on prices.

Current account surplus is expected to reach 7.2 percent of GDP in the fiscal year 2082/83 from 6.7 percent in the previous year. Although there is moderate growth in remittance inflow and export, temporary decrease in foreign employment, increase in import cost due to high oil price and possible fall in tourism income will put some pressure. In the next fiscal year, the current account savings are expected to fall to 5.3 percent.

Prolonging the Middle East conflict, weak capital budget implementation, financial sector risks and climate-related disasters are the major challenges, the report said, noting that the overall economic situation is highly uncertain. In addition, fluctuations in international oil prices and a possible decrease in remittances related to Gulf countries could pose additional risks.