Nepal’s economic growth target unlikely to be met, admits Central Bank

KATHMANDU: Nepal is unlikely to achieve the targetted economic growth in the current fiscal year 2025-26 due to the delayed monsoon, floods, and landslides that have affected the country's agriculture and other sectors, Nepal's Central Bank said on Monday.

It is the first time any government body has suggested that the growth target will not be achieved, although international institutions such as the World Bank have already revised Nepal's growth estimate downward for the fiscal year that began in mid-July. The Nepali government had set a six percent economic growth target when it presented the budget at the end of May.

"Late monsoon for paddy transplantation and the subsequent heavy rainfall that triggered floods and landslides affected agriculture and other sectors," the Nepal Rastra Bank (NRB), the country's Central Bank, said while unveiling the first quarterly review of the monetary policy. "Economic growth in the current fiscal year will be slightly lower than the target."

The NRB, however, did not project any specific growth figure. In early November, in its flagship report Nepal Development Update, the World Bank sharply lowered Nepal's economic growth projection to 2.1 percent from an earlier estimate of 4.6 percent, citing the impact of public unrest in September and the resulting political instability.

During the Gen-Z protests in early September, Nepal witnessed destruction of public and private infrastructure and the deaths of several Gen-Z demonstrators. The protests, launched by unorganised youths, led to the collapse of the powerful government led by former Prime Minister K P Sharma Oli, paving the way for a new government under current Prime Minister Sushila Karki.

The World Bank said the projected slowdown is expected to be largely driven by the services sector. Tourism activity is projected to decline sharply, reflecting a significant drop in international tourist arrivals, while the spillover effects of asset losses are expected to hit the insurance industry.

However, the NRB said foreign tourist arrivals were not affected as severely as initially assumed, despite damage to hotels during the protests.

Foreign-branded hotels, including the Hyatt Regency and Hilton, were severely damaged during the violent protests. The Hilton was burnt to the ground, while the Hyatt remains closed for maintenance. Arson and vandalism at hotel properties in Kathmandu and other regions caused damage worth NPR 25 billion, according to the Hotel Association of Nepal. (IANS)

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