Nepal’s gross domestic product (GDP) is anticipated to grow by 3.1% in fiscal year (FY) 2021 from a contraction of 1.9% in FY2020, says the Asian Development Outlook (ADO) 2021, the flagship economic publication of the Asian Development Bank (ADB). Growth is expected to recover from the low base in FY2020, as a result of the gradual lifting of nationwide lockdown since July 2020, and a pickup in domestic demand.

The ongoing vaccination campaigns against the coronavirus disease (COVID-19) pandemic will help strengthen the economic impetus. “The COVID-19 contagion that seemed to have tapered off until end-March 2021 is now spreading rapidly. If strict containment measures that have been initiated to tackle this second wave of infections are necessary for a prolonged period in the remainder of this fiscal year, then GDP growth will be lower than the forecast”, said ADB Officer-in-Charge for Nepal, Sharad Bhandari.

Agriculture is expected to rise by 2.4% in FY2021 as paddy yield is likely to increase by 1.3%, owing to a good monsoon and increased acreage under production. Manufacturing and service industries gradually reopened following the end of the lockdown since July 2020. The affected industries, including micro, small, and medium-sized enterprises (MSMEs) have been receiving economic support in the form of concessional lending and refinancing of existing loans to mitigate the adverse effects of the downturn.

Construction began to pick up, while the completion of some major projects of the government is expected to boost economic recovery. The Upper Tamakoshi Hydropower is expected to begin its first phase of production, while water from the Melamchi Water Supply Project began flowing since March 2021.

Overall, industry is expected to grow by 2.5% after contracting by 4.2% in FY2020. The services sector is expected to grow by 3.4% in FY2021, though hospitality, travel, and tourism subsectors will take a longer time to recover.