Macroeconomic Update: Nepal (September 2022)

Nepal's economy is anticipated to modestly expand by 4.7% in FY2023, down from an estimated growth of 5.8% in FY2022. GDP growth is forecast to moderate largely reflecting the tight monetary policy necessary to stem the rise in imports, a marked decline in foreign exchange reserves, and inflationary pressure. Annual average inflation edged up to 6.3% in FY2022 and is forecast to marginally decline to 6.1% restrained by tight monetary policy, a normal harvest, somewhat subdued oil prices, and a modest inflation decline in India. The current account deficit is estimated to narrow to 8.1% of GDP in FY2023, down from 12.9% a year earlier, owing to a moderation in merchandise imports amidst stable remittance inflows.