Nepal Economy Update May 2025 by CareEdge Ratings
In mid-April 2025, Nepal’s economy was marked by easing inflation, particularly in the food and beverage category, and a dip in tourist arrivals. Foreign exchange reserves hit a record high of USD 17.6 billion, providing a cushion against external shocks. However, the trade deficit widened to Rs 133.9 billion. Additionally, during the first nine months of the fiscal year, the current account and balance of payments continued to show a surplus.
Inflation
Nepal’s consumer price inflation moderated to 3.4% year-on-year (y-o-y) in mid-April, down from 3.7% in mid-March. The easing was primarily owing to food and beverage inflation, which moderated to 2.4% from 3.3% in the previous month. Meanwhile, inflation in the non-food and services category edged lower to 3.9% from 4%. Within the food and beverage category, the yo-y price index decreased in the vegetable, spices and meat & fish subcategories. On the other hand, an increase was observed in subcategories such as ghee & oil, fruit, pulses & legumes and non-alcoholic drinks. In the non-food and services category, the yo-y price index increased for sub-categories including miscellaneous goods and services, clothes and footwear, alcoholic drinks, furnishings & household equipment, and tobacco products.
External Sector
In mid-April, Nepal’s foreign exchange reserves reached a record high of USD 17.6 billion, a 15.3% increase since mid-July. These reserves are sufficient to cover 14.2 months of projected merchandise and service imports. Remittance inflows stood at Rs 139.5 billion in mid-April, down from Rs 151.2 billion in the previous month.
In mid-April, Nepal's merchandise exports surged to Rs 30 billion, up from Rs 13.3 billion a year ago. However, on a month-on-month basis, exports declined by 3.1%. Export growth was primarily driven by increases in the exports of soybean oil, polyester yarn and thread, tea, jute goods, and rosin during the first nine months of the fiscal year. Meanwhile, merchandise imports rose 19.6% (y-o-y) to Rs 164 billion. The trade deficit widened to Rs 133.9 billion in mid-April, from Rs 126 billion in the previous month and Rs 123.8 billion in mid-April 2024.
Forex Reserves and Import Cover
Trade Deficit
During the first nine months of the fiscal year, Nepal maintained a current account surplus of Rs 210.2 billion, up from Rs 179.8 billion in the same period last year. Net capital transfers rose to Rs 7.7 billion, compared to Rs 4.8 billion in the same period last year. Foreign direct investment (equity only) also saw an uptick, reaching Rs 9 billion from Rs 6.5 billion. However, the balance of payments surplus narrowed slightly to Rs 346.2 billion, down from Rs 365.2 billion in the same period of the previous year.
Tourism
Tourist arrivals in Nepal dipped by 4.3% in mid-April compared to the previous month, indicating a slight slowdown in momentum. However, on a year-on-year basis, arrivals were up by 4.6%. Overall, Nepal received 9.2 lakh tourists in the first nine months of the fiscal year, slightly higher than the 9 lakh recorded during the same period last year.
Tourist Arrivals
Monthly Data of Key Economic Variables
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