Here’s a compact, evidence-based 10-year outlook for Nepal’s economy (2026–2035). I give a short executive summary, three scenarios (baseline / optimistic / downside) with numbers and drivers, main structural opportunities & bottlenecks, key risks, and clear policy / investment priorities you can act on. I cite the most important sources for the load-bearing facts and projections.
Executive summary
Over the next decade Nepal is likely to remain a fast-growing low-middle income economy relative to its past, but growth will be modest unless large structural reforms and major hydro-electric export scaling happen. Under a realistic baseline — assuming current policies, continued remittance strength, steady tourism recovery, and phased hydropower commissioning — annual real GDP growth of ~4–5% is plausible on average. An optimistic path (major reforms, rapid hydropower exports, higher FDI) could lift average growth to 6–7%; a downside path (political instability, weaker remittances, climate shocks) could see growth slip to 2–3%. These ranges and the short-term anchors (remittances, tourism, hydropower) are supported by recent World Bank/ADB/IMF reporting and market coverage. World Bank+2Asian Development Bank+2
Scenarios (numbers are average annual real GDP growth over 2026–2035)
Baseline (most likely): 4–5%
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Why: World Bank and ADB see growth recovering modestly with services (trade, retail), remittances stabilizing around historical highs (~20–30% of GDP range historically) and tourism continuing its rebound. Baseline assumes moderate policy continuity, incremental hydropower exports and steady private consumption. World Bank+1
Optimistic: 6–7%
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Why: Rapid scaling of large hydro projects, strong transmission links to India/Bangladesh, big surge in exportable electricity, improved business climate (tax & regulatory reform), higher private investment and FDI in energy & tourism. The government’s development plans aim high (16th Plan targets), but World Bank cautions current policies fall short of those targets — so optimistic requires reforms. World Bank+1
Downside: 2–3%
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Why: Political instability, weaker global demand and tourism shocks, lower remittances (global job market changes), major climate events damaging agriculture and infrastructure, or fiscal stress that crowds out investment. Recent reports highlight vulnerability to natural disasters and lingering structural weaknesses. World Bank+1
Key drivers that will determine outcomes
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Remittances (structural backbone)
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Remittances have been and are likely to remain a large share of GDP (World Bank projects stabilization around the mid-20% range of GDP over projections). They support domestic demand, foreign exchange and household consumption. Any major drop in remittances would immediately pressure growth and the current account. World Bank
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Hydropower scaling & electricity exports
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Nepal is actively commissioning large hydro plants and has begun exporting electricity (first exports to Bangladesh via India; agreements with India for increasing imports). If transmission, pricing, and dispatch arrangements scale, electricity exports could become a major foreign-exchange earner and growth driver. Reuters and regional sources confirm early exports and further export agreements. Reuters+1
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Tourism recovery
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International arrivals have rebounded strongly post-pandemic and are projected to continue rising — tourism is a fast turnaround sector that supports services, employment and foreign exchange (NTB / tourism statistics show strong recent months). Continued growth helps services GDP and jobs. Tourism Info Nepal+1
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Public finance, debt & banking health
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Fiscal space is constrained: financing large infrastructure and social spending requires better revenue mobilization and debt management. Banking sector vulnerabilities (rising NPLs) could restrict credit if not addressed. IMF/World Bank monitoring flags these constraints. IMF+1
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Trade & regional integration
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Heavy trade dependence on India for imports and transit; expanding energy trade and improved connectivity with India/China can reshape export possibilities but require diplomacy, transmission infrastructure and investment. WITS data and trade reports show India as the dominant partner. World Integrated Trade Solution+1
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Major opportunities (what could be leveraged)
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Hydropower as an exportable commodity — large projects, cross-border transmission, and the India/Bangladesh market represent a transformational export sector if regulatory and commercial frameworks are fixed. Reuters+1
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Services & tourism expansion — adventure, high-value eco and cultural tourism can scale with better air connectivity and value-added services. Tourism Info Nepal
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Remittance-financed entrepreneurship — channeling remittances into local productive investment (finance products, diaspora bonds, local SME finance) can convert consumption relief into capital formation. World Bank
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Agricultural productivity & diversification — modernizing irrigation, mechanization and value chains can protect rural incomes and lower import dependence for staples.
Main risks (what would derail growth)
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Climate & natural disasters: floods, landslides and erratic monsoons damage crops and infrastructure; these shocks recur and are material for GDP volatility. (World Bank highlights resilience needs.) World Bank
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Political instability & policy uncertainty: delays in project approvals, land acquisition or shifting rules dampen FDI and domestic investment. World Bank
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External shocks: weaker global demand, a slowdown in GCC / Malaysia (major migrant destinations) could reduce remittances. World Bank
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Banking stress & rising NPLs: could compress credit and crowd out private investment. IMF
Practical policy & investment priorities (concise action list)
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Fast-track commercially bankable hydropower + transmission corridors
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Prioritize transparent PPAs, regional interconnects (India/Bangladesh) and phased auctions to attract international energy investors. This has the highest upside for forex and GDP. Reuters
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Improve revenue mobilization & fiscal management
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Broaden tax base, improve tax administration, and issue diaspora or project bonds to finance transmission rather than high-cost external debt. World Bank stresses fiscal reforms to meet growth plans. World Bank
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Strengthen financial sector supervision
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Clean up NPLs, recapitalize weak banks/SACCOs, and enable SME credit lines to keep investment flowing. IMF/World Bank reviews flag rising financial sector risks. IMF+1
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Channel remittances into productive investment
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Offer matched savings, diaspora bonds for infrastructure, and easier FX channels for investment into startups and agribusiness. World Bank
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Tourism & services upgrade
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Invest in air connectivity, high-quality trekking/eco projects, and training to capture higher per-tourist receipts — these are quick wins once safety and infrastructure are ensured. Tourism Info Nepal
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Climate-resilient infrastructure
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Prioritize roads, flood control, and resilient supply chains to lower the economic cost of disasters. World Bank reports repeatedly emphasize resilience. World Bank
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Bottom line (one paragraph)
Nepal’s next decade is a story of potential vs. implementation. The country has three game-changing strengths — remittances (large and stable), fast-recovering tourism, and world-class hydropower potential — that together can lift growth materially. But realizing a consistent 6%+ growth path requires decisive reforms (fiscal, financial, regulatory), successful commissioning and commercialization of hydropower with regional buyers, and climate resilience investments. Without those, growth will probably stay in the 4–5% band and remain vulnerable to external shocks and natural disasters.