World Bank Forecasts Nepal’s Growth to Slow to 2.1% in FY26 Amid Political Unrest
KATHMANDU: Nepal’s economic growth is expected to slow sharply to 2.1 percent in FY26, down from 4.6 percent in FY25, as political instability and the aftermath of the September 2025 public unrest weigh on economic activity, according to the World Bank’s latest Nepal Development Update released on Thursday. Growth is projected to rebound to 4.7 percent in FY27, supported by reconstruction efforts.
The report, titled Reforms to Accelerate Public Investment, highlights that the services sector is likely to be the most affected by recent disruptions. While the outlook remains uncertain, the Bank said that a smooth political transition and sound economic management could strengthen investor confidence and support a faster recovery.
Finance Minister Rameshore Prasad Khanal said the government has launched an Integrated Business Recovery Plan to help restore business confidence and speed up recovery. “Public resources have been reprioritised toward infrastructure rehabilitation and election preparations, and a Reconstruction Fund has been established to help restore damaged public and private assets,” Khanal said, adding that the measures aim to boost private sector activity and build a more resilient economy.
The report emphasises the importance of strengthening public investment management to achieve sustained growth. In FY24, Nepal’s capital spending across federal, provincial, and local governments stood at 7.9 percent of GDP, below the 10–15 percent needed annually to meet infrastructure demands.
“Boosting public investment is critical for improving growth, creating jobs, and building prosperity for Nepalis,” said David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka. He urged the government to implement reforms in project planning, budgeting, land acquisition, procurement, and cash management to accelerate development projects.
Published twice a year, the Nepal Development Update provides an in-depth analysis of key economic trends and policy challenges within a broader regional and global context.
