The World Bank has published its Nepal Development Update, projecting Nepal’s growth to slow to 2.3% in fiscal year 2026 (FY26) from 4.6% in FY25, citing spillovers from the ongoing conflict in the Middle East and the lingering effects of the September 2025 unrest. Growth is expected to pick up to an average of 4.4% over FY27–FY28, supported by reconstruction activity, continued hydropower expansion, and consumption linked to the 2027 subnational elections. Services are expected to be the most affected sector in FY26 due to weaker tourism, higher transport costs and potential supply chain disruptions, with the outlook described as highly uncertain. The update flags that a prolonged Middle East conflict could dampen tourist arrivals, reduce remittances and weaken consumption, while improved political stability after the March elections, sound macroeconomic management, ample buffers and continued structural reforms could strengthen investor confidence and private investment; it also highlights the need to improve the business environment, develop foundational infrastructure, mobilize private finance and support sectors including tourism, IT and agribusiness. The Nepal report is positioned as a companion to the World Bank Group’s South Asia Economic Update, which projects South Asia’s growth to slow to 6.3% in 2026 from 7% in 2025 due to disruptions in global energy markets, before recovering to 6.9% in 2027. That regional report includes an assessment of industrial policy in South Asia, noting high usage relative to other emerging economies but mixed results, and recommends carefully designed sector measures alongside broad-based improvements in the business environment, regulatory predictability and state capacity.
World Bank 2026-04-08
World Bank projects Nepal growth to slow to 2.3% in FY26 and South Asia growth to ease to 6.3% in 2026
The World Bank’s Nepal Development Update projects Nepal’s growth to slow to 2.3% in fiscal 2026 from 4.6% in 2025, before recovering to an average of 4.4% in 2027–2028, with services most affected amid a highly uncertain outlook. The report highlights risks from a prolonged Middle East conflict and domestic unrest, and calls for improving the business environment, infrastructure, private finance mobilisation and support for tourism, IT and agribusiness. As a companion to the South Asia Economic Update, it situates Nepal in a region where growth is projected to ease to 6.3% in 2026 before rebounding to 6.9% in 2027, and urges more effective industrial policy and stronger regulatory predictability.