Nepal’s economy showed signs of improvement in the second quarter of the current fiscal year (FY 2024/25), according to the National Statistics Office (NSO). The NSO reported that sectors previously experiencing negative or minimal growth have begun to recover.
Releasing a report on Wednesday, the NSO said its preliminary estimates showed that the country’s gross domestic product (GDP) grew by 5.1 percent in the second quarter compared to the same period in the previous fiscal year. This positive trend is attributed to recoveries in the manufacturing industry, construction, mining, and increases in deposits and credit. Notably, all 18 industrial classifications of the economy exhibited positive value-added growth rates during this period.
The construction and manufacturing sectors, which faced continuous negative growth over the past two fiscal years, showed significant improvement. The construction sector grew by 9.1 percent, while the manufacturing sector expanded by 7.4 percent. This marks a reversal from the 4 percent contraction observed in the manufacturing sector during the same quarter of the previous fiscal year. The upturn in these sectors is linked to increased imports of construction materials and enhanced domestic production. Additionally, the wholesale and retail trade sector showed improvement, with an estimated growth rate of 6.1 percent.
Recent data from the Department of Customs indicated that both imports and exports have improved, with imported goods playing a significant role in trade activities. Furthermore, Nepal Rastra Bank data revealed a notable increase in import credit over the past few months. Deputy Chief Statistical Officer of the NSO, Dhundiraj Lamichhane, stated that the growth in the trade sector expanded in the second quarter due to increased domestic production of agricultural and trade goods, as well as a rise in the import of major trade items.
Lamichhane also noted that the manufacturing industry’s growth improved due to the gradual increase in industrial goods production compared to the same quarter in the previous fiscal year. However, other service sectors, including public administration and defense, health, real estate, and others, experienced moderate growth during this quarter. Activities related to transportation and storage recorded the highest growth rates, followed by the mining and quarrying sector, with the electricity and gas sector also showing notable increases.
The agriculture sector, a significant contributor to Nepal’s economy, experienced a modest growth rate of 3.2 percent. This growth is attributed to increased production of rice, vegetables, citrus fruits, winter fruits, and livestock and poultry products.
Economist Keshav Acharya acknowledged these positive indicators but expressed concern over the lack of increased investor confidence and the government’s inability to spend even 30 percent of the total capital budget. He highlighted ongoing issues, such as construction entrepreneurs awaiting substantial payments and halted projects, suggesting, “Statistical indicators point to one thing while the ground realities are different.”
The NSO observed that, despite fluctuations in Nepal’s economic growth rate, an analysis of quarterly GDP growth over the past three fiscal years indicates a corrective trend beginning in FY 2022/23.
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