Economic Growth Expected to Exceed Average Due to Monetary Easing: NRB Report

Kathmandu — Nepal’s economic growth is expected to remain above average as a result of monetary easing measures adopted by the Nepal Rastra Bank (NRB), according to the Integrated Annual Economic Activity Study Report (FY 2024/25 – 2081/82) prepared by the central bank’s Economic Research Department.

The report states that the decline in global fuel and food prices, falling interest rates on loans and deposits, significant growth in hydropower production, increased tourist arrivals, and growth in exports and remittance inflows have collectively supported stronger economic expansion. It also notes that inflationary pressure is expected to remain low in the current fiscal year 2025/26 (FY 2082/83), while overall economic activities are projected to be more positive compared to the previous year.

According to the report, adequate liquidity in the economy, government efforts to promote good governance, progress in reconstruction works, and the postponement of small and less-prepared projects in favor of project prioritization have helped energize the economy and boost economic activities.

Based on preliminary estimates by the National Statistics Office, Nepal’s economic growth rate for FY 2024/25 (2081/82) is expected to be 4.6 percent at consumer prices and 4.0 percent at current prices. The revised estimate shows economic growth of 3.7 percent in FY 2023/24 (2080/81).

Sector-wise, the contribution to Gross Domestic Product (GDP) in FY 2024/25 is estimated at 25.2 percent from agriculture, 12.8 percent from industry, and 62.0 percent from the services sector. Provincially, Bagmati Province accounts for the largest share of GDP at 36.5 percent, followed by Koshi Province at 15.9 percent, while Karnali Province has the smallest share at 4.2 percent.

The report further notes that as of mid-July 2024, industrial sector loans accounted for 30.42 percent of total credit extended by banks and financial institutions. Compared to mid-July 2023, bank deposits increased by 12.5 percent and credit disbursement by 8.2 percent by mid-July 2024. The average credit-to-deposit ratio stood at 76.6 percent.

Bagmati Province continues to dominate the banking sector, holding 65.8 percent of total deposits and 59.5 percent of total credit nationwide. In the external sector, total merchandise exports surged by 81.8 percent, reaching NPR 277.03 billion, while imports increased by 13.3 percent to NPR 1.804 trillion in FY 2024/25, according to the report.