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By Sandeep Chaudhary

Real GDP Growth at Purchasers’ Price: What Investors Must Know

Real GDP Growth at Purchasers’ Price: What Investors Must Know

Nepal’s real GDP at purchasers’ price is one of the most critical indicators for investors as it reflects the actual expansion of the economy after adjusting for inflation. Over the past five years, Nepal has witnessed fluctuating growth, shaped by external shocks, domestic policy challenges, and structural bottlenecks. Growth peaked at 5.6% in FY 2021/22, supported by post-pandemic recovery momentum, before sharply slowing to 2.0% in FY 2022/23, one of the weakest performances in recent history. The economy regained some footing in FY 2023/24 with growth at 3.7%, and the outlook for FY 2024/25 is stronger at 4.6%, showing clear signs of stabilization.

For investors, these trends matter deeply. Real GDP growth reflects the overall demand environment, the health of consumer spending, and the opportunities available for business expansion. The improvement to 4.6% suggests that the economy is entering a more stable phase, supported by rising remittances, strong external balances, and low inflation. At the same time, it highlights that Nepal remains vulnerable to slower investment momentum, as capital formation has fallen below 30% of GDP, limiting the productive capacity of the economy.

A closer look at sectoral dynamics reveals that services remain the main driver of real GDP growth, powered by remittance-led consumption, financial activity, and a recovering tourism sector. Agriculture continues to provide stability but limited dynamism, while industry faces headwinds from weak fixed capital formation and underutilized public investment. For investors, this means that short-term opportunities are strongest in services—especially financials, retail, IT, and tourism—while longer-term growth requires policy reforms to revive industrial and infrastructure investments.

The most important insight is that while Nepal’s real GDP growth of 4.6% looks encouraging compared to the past two years, it still falls short of the 6–7% growth needed to significantly transform the economy, reduce unemployment, and raise incomes. Investors must therefore assess opportunities with caution: near-term gains are possible in consumption-led sectors, but long-term value creation depends on how effectively Nepal channels remittance income and high savings into productive domestic investment.

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