Real vs Nominal GDP: Understanding Nepal’s 2082/83 Growth Trend

Nepal’s growth outlook for FY 2082/83 (2025/26) can be better understood by comparing real GDP and nominal GDPtrends. Real GDP, which adjusts for inflation, reflects the true increase in the country’s production of goods and services. For FY 2024/25, Nepal’s real GDP at purchasers’ price is projected to grow by 4.6%, up from 3.7% in FY 2023/24 and only 2.0% in FY 2022/23. This signals that the economy is gradually recovering in terms of actual production capacity, fueled by improved remittances, better trade performance, and lower inflation.

On the other hand, nominal GDP, which is measured at current prices without adjusting for inflation, is projected to grow by 7% in FY 2024/25. While this figure is higher than real GDP growth, much of the difference reflects price effects rather than increased production. For example, in previous years, nominal GDP surged by 14.3% in FY 2021/22, but real GDP only grew by 5.6%, meaning that inflation contributed significantly to the expansion. The recent moderation of inflation—falling from 8.08% in FY 2021/22 to just 2.20% in FY 2024/25—has narrowed the gap between nominal and real GDP growth, showing that Nepal’s growth is becoming more production-driven rather than inflation-driven.

This distinction is crucial for policymakers and investors. Real GDP indicates whether economic activities are expanding in substance, creating jobs, and boosting output, while nominal GDP captures the overall value of the economy at current market prices. The improvement in real GDP alongside stable nominal growth in FY 2082/83 suggests a healthier growth trend compared to past years when inflation artificially inflated nominal figures. The challenge, however, remains in sustaining real growth by improving capital formation, enhancing productivity, and channeling public investment into infrastructure and innovation.