Nepal's Economic Growth: World Bank Predictions and Optimism

The World Bank has suggested that Nepal may experience accelerated economic growth in the near future. The South Asia Economic Update and Nepal Development Update 2023 were released by the institution, predicting a 3.9 percent growth rate for Nepal's economy in 2024. The Nepal Economic Journalists Society, together with Kathmandu University, published this report. Such reports will be issued by the World Bank every six months. Factors contributing to the positive outlook of Nepal's economy include the lifting of import restrictions, a boost in tourism, and advancements in monetary policy. According to the report, Nepal's economy is expected to grow by 5 percent in 2025.

Mr. Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka, conveyed his optimism about economic growth in the coming years. He acknowledged the potential for significant economic growth in Nepal and was pleased with the progress made in this least-developed country. The projections are based on reliable data, he added.

World Bank's chief economist for South Asia Ms. Franziska Ohnsorge emphasized the challenges in South Asia such as increasing oil prices, climate change, the consequences of natural disasters on populations, limitations on import and foreign currency reserves, and the impact of new foreign currency policies on economies. The production and services of the global market were mentioned to affect their exports. Ohnsorge's comment about weak private investment and low income in most South Asian countries underscores growing financial issues in the region. She also identified high-interest rates and government failures to regulate policies as obstacles.

Nayan Krishna Joshi from the World Bank provided updates on Nepal, saying that significant progress has been made in its energy sector. In the last year alone, 500 megawatts were added to the national grid allowing Nepal to export electricity to India with plans to extend exports to Bangladesh as well. This has contributed to economic development. Joshi mentioned that consumer prices in Nepal have reached a seven-year peak, and the current account deficit has grown due to an increase in remittances and low exports. However, import restrictions and increased remittances have kept deficits low for six years. He advised that Nepal should prioritize domestic production and policy modifications to attract foreign investments without increasing the deficit.

At the discussion, Dr. Ramesh Chandra Paudel from the National Planning Commission highlighted the need to redefine Nepal's education system to retain the youth population within the country. Aarti Rajya Laxmi Rana, Chief Business Officer of Sunrise Bank, observed that decreased imports and increased remittances are positive indicators for the nation's economy. She also mentioned progress in the hydroelectric sector, noting an increase in electricity export revenue.

Similarly, Dorothy Loadscher from the Swiss Embassy in Nepal emphasized the importance of technical and vocational education in fostering Nepal's economic development. Educated Nepali youth are increasingly looking toward countries like India for employment opportunities. Also, Dr. Paras Kharel, Executive Director for Trade in South Asia, stressed boosting production-focused sectors and promoting exports due to Nepal's reliance on remittance income.

The Ministry of Finance's economic advisor, Dr. Posharaj Pandey, stated that government budget plans aim to enhance production and streamline the digital economy, with Dr. Bhola Nepal from Kathmandu University calling attention to green energy research as a priority for their institution. As part of this effort, they have a laboratory dedicated to green hydrogen production that could potentially lead to exports.