KATHMANDU:- Nepal’s economy is forecast to grow by 2.7% in fiscal year (FY) 2026, down from 4.6% in FY2025, according to the Asian Development Outlook (ADO) April 2026, Asian Development Bank’s (ADB) flagship economic publication.

“The country’s economic growth will significantly slow in FY2026 amid political uncertainties, including last year’s civil unrest and the conflict in the Middle East,” said ADB Country Director for Nepal Arnaud Cauchois. “While renewed political stability is expected to support reforms, and bolster economic confidence, substantial downside risks remain, particularly from the Middle East conflict, which is affecting oil prices, tourism, and remittance flows.”

Gross domestic product (GDP) growth is expected to climb to 5.0% in FY2027 as the effects of recent shocks fade, leading to stronger domestic demand, hydropower exports, and tourism. The forecasts are informed by assumptions finalized on 10 March under exceptionally high uncertainty, envisaging an early stabilization scenario for the conflict in the Middle East. Evidence since then points to a higher likelihood of more persistent disruptions.

Inflation is projected at 3.7% in FY2026 and to further rise to 4.5% in FY2027, driven by expected stronger domestic activities under the early stabilization scenario.

The Middle East conflict is expected to hamper the expansion of Nepal’s current account surplus. It is projected to widen to 7.2% of GDP in FY2026 from 6.7% in FY2025, supported by moderate growth in remittance inflows and exports. This will be partly offset by a temporary halt in out-migration, a rising import bill driven by higher oil prices, and potential losses in tourism receipts during the peak spring season. The current account surplus is then expected to moderate to 5.3% in FY2027.

The outlook remains subject to very high uncertainty and substantial downside risks. These include a prolonged Middle East conflict, weak capital budget execution, financial sector vulnerabilities, and climate-related hazards. There are elevated risks from global oil price volatility and potential weakness in Gulf Cooperation Council (GCC) countries-linked remittances in case of a prolonged conflict.

ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region.