NSO Estimates Nepal’s Economy Grew 3.02% in Q1 FY 2025/26

Nepal’s economy is estimated to have expanded by 3.02 percent year-on-year in the first quarter of the current fiscal year 2025/26, according to the National Statistics Office (NSO).

Preliminary figures released on January 14, 2026, show that gross domestic product (GDP) at basic prices grew 3.02 percent between mid-July and mid-October. Growth in the same period last fiscal year stood at 2.9 percent.

Although all 18 industrial sectors are estimated to have recorded positive growth, the overall pace remained modest due to contraction in food crops, forest products, non-life insurance sector, and domestically produced construction materials, the NSO said.

The expansion was driven by higher electricity generation and distribution, financial activities, livestock production, fruits and vegetables production, trade services, and increased tourist arrivals.

The electricity, gas, steam, and air-conditioning supply sector posted the highest growth at 14.9 percent. Financial and insurance activities followed with a growth rate of 7.1 percent.

Agriculture, forestry, and fishing —the largest contributor to the economy —grew by just 1.4 percent. The NSO attributed the weak performance to a decline in paddy production. However, modest growth in livestock, vegetable, and fruit production helped support overall value addition in the sector.

The wholesale and retail trade sector, which accounts for the second-largest share of GDP, is estimated to have grown by 3.89 percent. The growth was supported by increased domestic production and imports of trade-related goods.

The lowest growth rates were recorded in water supply, sewerage, waste management, and remediation activities, at 1.11 percent. The human health and social work activities sector was estimated to have grown  1.19 percent.

On a quarter-on-quarter basis, seasonally adjusted data show that GDP contracted by 1.7 percent. Thirteen of the 18 sectors recorded contraction, with mining and quarrying declining the most, by 10 percent.

Among the five sectors that expanded quarter-on-quarter — electricity and gas, accommodation and food services, information and communication, professional and technical activities, and administrative services—the electricity and gas sector posted the strongest growth, at 5 percent.

NSO Director Dinesh Bhattarai said food crops and forest products under agriculture, construction materials under manufacturing, and non-life insurance under financial services contracted during the quarter.

“Due to insurance payouts linked to damage from the Gen Z movement, value addition in the non-life insurance sector is estimated to have turned negative,” Bhattarai said. He added that production of construction materials, including steel rods, also declined compared to the same period last year.

Bhattarai noted that while the impact of the Gen Z movement was not strongly visible across all sectors in the first quarter, its effect on the investment climate could become more pronounced in subsequent quarters.

Government estimates put damage to public and private property during the protests of September 8–9 at more than Rs 84 billion. Since then, private sector groups have repeatedly raised concerns over deteriorating law and order and a weakened investment environment.

NSO spokesperson Dhundiraj Lamichhane said growth across many sectors remains fragile. “Economic momentum has not picked up due to contraction in some key areas,” he said.

Economist Keshav Acharya said weak aggregate demand continues to weigh on the economy. “Liquidity is ample, but demand has not recovered,” he said, adding that poor capital budget spending has further constrained growth. Notably, the government spent only 12.12 percent of the capital budget allocated for the current fiscal year in the first six months. 

Ravi Singh, president of the Federation of Contractors’ Associations of Nepal, said the construction sector remains under pressure due to "abrupt" contract terminations.

He blamed the government’s failure to manage stalled projects and said dozens of contracts were terminated without adequate resolution mechanisms. “The construction sector has been hit hard, and there has been little effort to find a way out,” he said.