World Bank Cuts Nepal’s Growth Forecast to 3.7% Following Rasuwa Floods

Economic expansion in Nepal is expected to slow to 3.7 percent in the 2026/27 fiscal year, according to figures released by the World Bank. The deceleration follows the severe impact of the August 26 floods in Rasuwa, which caused substantial human and economic losses. Industry is projected to serve as the primary drag on economic activity, driven by widespread damage to transport links, electricity transmission networks, solar installations, and hydropower facilities that will restrict manufacturing and power generation. David Sislen, World Bank Division Director for Maldives, Nepal and Sri Lanka, stated that the disaster should be treated as a moment to rethink infrastructure and essential services. He stressed that resilience, redundancy, and climate considerations must be placed at the centre of future investment planning for connectivity, energy, water, sanitation, health, and education. The findings were detailed in the institution's publication titled “Nepal Development Update, Building Back Differently for the Future.” In a broader regional assessment, the latest South Asia Economic Update projects economic growth for South Asia to reach 6.9 percent this year. Franziska Ohnsorge, World Bank Group Chief Economist for Asia, indicated that strong domestic demand is helping the region withstand global economic shocks. Furthermore, the regional report highlights that artificial intelligence could transform development pathways by enhancing labour productivity, broadening export markets, and upgrading public service delivery. Reports indicate that economic growth is anticipated to rebound to 5.2 percent in the subsequent fiscal year of 2027/28. The institution's updates underline the importance of addressing vulnerabilities through integrated social protection systems and clear regulatory frameworks, particularly as changing climatic conditions present evolving risks to infrastructure across the country.