IMAGE VIA NEPAL ECONOMIC FORUM
HERE IS a simple question: how fast is Nepal’s economy growing this year? The World Bank has an answer: 2.3%. The Asian Development Bank has a different one: 2.7%. Nepal’s own National Statistics Office has published yet another: 3.85%. All three forecasts cover the same twelve months—Nepal’s fiscal year, which runs from mid-July 2025 to mid-July 2026. All three were released within three weeks of each other in April. None of them agree.
In a country growing at just 2–4%, a 1.55-percentage-point gap can mean the difference between stagnation and recovery. It shapes how much the government thinks it can spend; how much it can borrow; and how confidently it can tell its citizens that things are getting better. When the forecast diverges this widely, the numbers stop being a guide to policy and start being a menu.
So why do they differ? Part of the reason is technical and, on its own, unalarming. The two multilateral banks measure the economy one way—stripping out taxes and government subsidies to get at what producers actually earn, a figure economists call GDP at basic prices. Nepal’s statisticians lead with a different measure that includes those taxes and subsidies. Adjust for that and the NSO’s headline figure drops from 3.85% to 3.68%. Closer, but still nearly a full point above the donors. The methodology gap explains some of the distance. It does not explain most of it.
The bigger reason is that forecasting involves assumptions, and in April the most consequential assumption anyone could make about Nepal’s economy was what would happen in the Middle East. The World Bank embedded a specific scenario into its model: a disruption to oil shipments through the Strait of Hormuz; higher fuel prices; and a knock-on effect on tourist arrivals in Nepal during the March-to-May trekking peak. Nepal’s spring climbing season (when tens of thousands of hikers and hundreds of Everest expeditions fill the mountain lodges) is one of the most reliable generators of foreign income the country has. If they stay away, services shrink fast. The ADB made similar assumptions. Slower tourists, costlier fuel, anxious households.
Nepal’s National Statistics Office did not model the Middle East conflict the same way. It had something the donor agencies lacked: eight months of actual data, from mid-July 2025 through mid-March 2026, before it had to start estimating the rest of the year. And those eight months told a more encouraging story than the banks expected. The economy grew at 3.02% in the first quarter and 4.05% in the second, better than the same periods a year earlier. Hydropower production surged nearly 21% as fourteen new plants came online. Remittances kept flowing. The services sector held up. Only agriculture disappointed badly: a drought during the rice-planting season in the southern plains, followed by floods in October, cut paddy output by over 4%.
The NSO then projected the final four months of the year forward and arrived at 3.85%. It is a forecast for those last months, not an observation: which means it carries the same uncertainty as any prediction. What the NSO does not know is whether Everest season actually delivered the visitors and the revenue. That answer only comes after mid-July when the fiscal year closes and the hotels and trekking agencies submit their accounts.
This is the crux of the problem. The World Bank and ADB may have been too pessimistic about a conflict that, at least in its early months, affected Nepal less severely than they feared. The NSO may be too optimistic about a final quarter it cannot yet see. The truth is probably somewhere in the middle—which is, unfortunately, not a number anyone can act on.
What makes this more than an academic argument is the budget. Finance minister Swarnim Wagle will stand before parliament on May 29th and announce the government’s spending plans for the coming year. The size of those plans—how many roads, schools and hydropower subsidies Nepal can afford—depends heavily on what growth is expected to be and what revenues the government expects to collect. Three forecasts, differing by 1.55 percentage points, give a finance minister considerable room to choose the baseline that suits his ambitions. The government had originally set a growth target of 6% for this year. It will not come close to any of the three forecasts. But 3.85%, from the national office, makes a better backdrop for a budget speech than 2.3% from Washington.
This is not a problem unique to Nepal. Poor countries with limited statistical capacity commonly produce preliminary national accounts that get revised substantially when full data arrive. What makes Nepal’s version of this problem worth watching is the scale of the institutional disagreement. When a country’s own statisticians and the banks that lend it money cannot agree on growth to within a percentage point, the numbers that are supposed to guide decisions about roads, schools and borrowed money become, in effect, political documents. Pick the one you like. Nobody will be able to contradict you until next year. ■
