The World Bank published its Nepal Development Update, projecting growth to moderate to 2.3% in FY26 from 4.6% in FY25, citing spillovers from the ongoing conflict in the Middle East and lingering effects of unrest in September 2025. It expects reconstruction, hydropower expansion and consumption linked to the 2027 subnational elections to support a rebound to an average of 4.4% over FY27–FY28. The update sees the services sector as most exposed in FY26 through slower tourism, higher transport costs and potential supply chain disruptions, and characterises the outlook as highly uncertain. It flags risks that a prolonged Middle East conflict could reduce tourist arrivals and remittance inflows, weakening consumption and overall activity, while improved political stability after March elections, macroeconomic management, available buffers and structural reforms could support investor confidence and private investment. As regional context, the World Bank Group’s South Asia Economic Update projects South Asia growth to slow to 6.3% in 2026 from 7% in 2025 due to disruptions in global energy markets, with growth recovering to 6.9% in 2027, and discusses mixed results from industrial policy in South Asia alongside recommendations for carefully designed sector measures and broader 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 amid Middle East conflict and domestic disruptions
The World Bank’s Nepal Development Update projects growth to slow to 2.3% in FY26 from 4.6% in FY25, then average 4.4% in FY27–FY28, driven by reconstruction, hydropower expansion and election-related consumption. It flags heightened uncertainty, with downside risks from a prolonged Middle East conflict affecting tourism and remittances, and upside risks from improved political stability, macroeconomic management and structural reforms. Regionally, the World Bank Group’s South Asia Economic Update forecasts South Asia growth easing to 6.3% in 2026 from 7% in 2025, then rising to 6.9% in 2027.