Kathmandu, October 7 — The World Bank has projected a significant slowdown in Nepal’s economic growth due to political instability and uncertainty caused by the recent “Gen Z” movement.
According to the South Asia Development Report released by the World Bank, Nepal’s economic growth for the current fiscal year 2082/83 (2025/26) is expected to fall to 2.1 percent, a sharp decline from the 5.2 percent growth forecast made in April. This marks a 3.1 percentage point reduction in the growth projection.
The Bank attributed the decline to the recent protests and the resulting political and economic uncertainty. “The recent unrest and rising instability in Nepal are expected to bring economic growth down to 2.1 percent,” the report stated.
The World Bank also warned that the ongoing situation could lead to a sharp drop in international tourist arrivals and financial losses to the insurance sector. Weak investor confidence is likely to slow private investment and infrastructure-related activities, except in the hydropower sector. In addition, delayed monsoon rains in the Madhesh Province, Nepal’s major rice-producing region, are expected to affect agricultural output.
However, the report expressed optimism for recovery in the next fiscal year (2083/84), noting that reconstruction activities could support economic revival and growth acceleration thereafter.
The report highlighted widespread public dissatisfaction with governance and limited domestic opportunities as the main causes of recent protests. It also pointed to structural barriers that hinder private sector growth, such as complex business regulations, corruption, high trade and transport costs, and poor infrastructure. These factors, it said, have kept Nepal’s growth rate lower than that of many comparable countries.
Between 2012 and 2024, Nepal’s average economic growth stood at only 4.3 percent, which has limited job creation. The World Bank noted that Nepal’s youth unemployment rate reached 22.7 percent in 2023, one of the highest in South Asia.
The report further stated that foreign employment has become a key livelihood strategy for many Nepalis, with remittances helping sustain basic household consumption.
In the previous fiscal year (2081/82), Nepal’s economy grew by 4.6 percent, up from 3.7 percent the year before. The World Bank projects growth to recover to 4.7 percent in the fiscal year 2083/84.
Among South Asian countries, Bhutan is expected to record the highest economic growth at 7.3 percent, followed by India (6.5%), Bangladesh (4.8%), Maldives (3.9%), and Sri Lanka (3.5%). The overall average growth for South Asia is forecast at 5.8 percent.
The report also identified global economic slowdown, trade policy uncertainties, social unrest, and emerging challenges from artificial intelligence (AI) in the labor market as major risks for South Asia.
“South Asia has great potential, but countries must address these risks in time. By leveraging AI and reducing trade barriers, nations can improve productivity, attract private investment, and create new jobs,” said Johannes Zutt, World Bank Vice President for South Asia.
