Nepal in 2025: Economic Resilience Amid Natural Challenges

Economic Progress and Challenges

Nepal’s economy is showing positive momentum with a projected growth of 4.5% in FY25, up from 3.9% in FY24. The services sector is emerging as a primary driver of growth, supported by a recovery in merchandise imports that is stimulating wholesale and retail trade.

The tourism sector has demonstrated remarkable recovery, with the country welcoming over 1.1 million international visitors in 2024, marking a 13% increase from the previous year. This surge in tourism has significantly contributed to Nepal’s economic growth.

Infrastructure Development and Challenges

Currently, the country faces temporary setbacks due to the ongoing upgrade of Tribhuvan International Airport, which has led to reduced operating hours and is affecting tourism targets. However, these improvements are expected to yield positive results for the sector in the medium term.

The industrial sector shows promise for robust growth, particularly in electricity and construction sectors. However, Nepal’s growth model heavily relies on remittances and tourism, making it vulnerable to external economic fluctuations.

Natural Disaster Preparedness

For Nepal, climate resilience remains a daily concern. Recent events highlight this challenge, with the country experiencing a 6.4 magnitude earthquake that resulted in 128 casualties. In the past year alone, Nepal has faced nearly 5,700 disaster incidents, ranging from earthquakes to landslides, glacial floods, and forest fires.

To address these challenges, the United Nations Development Programme (UNDP) has supported the implementation of a system enabling officials and citizens to report disaster incidents and potential risks in real-time. This system is now accessible across all seven provinces, 77 districts, and 753 municipalities of Nepal.

Future Outlook

Recent positive developments include private sector-led growth reforms introduced through five ordinances passed by Parliament in March 2025. However, challenges remain, including concerns about financial sector asset quality and the impact of frequent bureaucratic reshuffles on policy consistency.

As the second most vulnerable country globally to mortality risk from multiple hazards, Nepal’s continued growth and development depend heavily on sustained efforts to reduce risks, prepare for crises, and build resilience across the economy.