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Kathmandu, Nov 14: The World Bank predicts that Nepal’s economic growth will slow due to the Gen Z movement and the ensuing political instability. Its latest economic update projects Nepal’s growth at 4.6 percent in 2025, dropping to 2.1 per cent in 2026.

For fiscal year 2027, the report anticipates growth to increase to 4.7 per cent as reconstruction gains momentum.

According to the Nepal Development Update released on Thursday, the service sector will feel the biggest impact. The report notes that the outlook remains uncertain. Successful political transition and steady economic management can encourage investors and support recovery, but continued uncertainty may discourage investment.

Finance Minister Rameshwor Prasad Khanal said the government has introduced an integrated business recovery plan to rebuild business confidence. It includes grants, tax concessions and operational support. He said public resources have been directed toward infrastructure rebuilding and election preparation. A reconstruction fund has been set up to rebuild damaged public and private property. He added that these steps aim to rebuild the economy and revive private sector activities.

Beyond recovery efforts, the report stresses the need to strengthen public investment management for long term growth. In 2024, the total capital expenditure of federal, provincial and local governments stood at 7.9 percent of GDP, far below what Nepal needs for infrastructure. Meeting Nepal’s infrastructure needs requires investment equal to 10 to 15 percent of GDP.

David Sislen, World Bank Director for Maldives, Nepal and Sri Lanka, said increasing public investment is important for growth, jobs and overall prosperity. He said several measures need action. These include improving project preparation and budgeting, streamlining land acquisition and tree clearance, making fund management more effective and amending the public procurement law and regulations. These steps, he said, would help complete projects faster.

The Nepal Development Update is published twice a year and has long provided detailed analysis of Nepal’s economic progress.

People’s News Monitoring Service