Urja Khabar
Kathmandu: Nepal’s economic growth is projected to remain below 4 percent for a second consecutive year in fiscal year 2026/27, as rising international oil prices and escalating geopolitical tensions cloud the country’s economic outlook, according to the International Monetary Fund (IMF).
In its latest World Economic Outlook report released on Tuesday, the IMF projected Nepal’s economy to grow by 3.6 percent in FY 2026/27, with growth edging up slightly to 3.7 percent in FY 2027/28. The projections point to a prolonged period of subdued economic expansion amid mounting external risks.
The IMF also warned of renewed inflationary pressure, projecting consumer price inflation in Nepal to rise to 5.8 percent in 2027 after easing from 4.1 percent in 2025 to 3.1 percent in 2026.
Rising global oil prices pose a major threat to Nepal’s economic stability, given its heavy reliance on imported petroleum products and other essential goods. Escalating conflict in the Middle East and potential disruptions to energy supplies could drive up production and transportation costs, pushing domestic prices higher and squeezing household budgets.
The report noted that crude oil prices had climbed above $100 per barrel amid the ongoing Middle East conflict. A further escalation could push prices to $130 per barrel, weakening global economic growth and intensifying inflationary pressures.
For Nepal, higher oil prices could have far-reaching consequences, increasing operating costs for businesses, raising household expenditure and dampening overall economic activity. The country’s dependence on imports leaves it particularly exposed to volatility in international energy and commodity markets.
The IMF projected global economic growth at 3.1 percent in 2026, down from an estimated 3.5 percent in 2025, before recovering modestly to 3.4 percent in 2027. Geopolitical tensions and disruptions in energy markets are expected to weigh on the global economy.
Investment in technology, particularly artificial intelligence (AI), has nevertheless helped sustain economic activity in several major economies. Spending on AI infrastructure, tools and technological development has supported investment and productivity gains.
However, the IMF cautioned that the benefits of technological advances remain unevenly distributed. Countries with limited access to AI development, infrastructure and investment opportunities risk missing out on potential productivity gains and stronger economic growth.
Among major economies, the United States is projected to grow by 2.3 percent in both 2026 and 2027. Private consumption, tax cuts and investment in AI technology are expected to support economic activity, while technological advances could strengthen productive capacity and boost productivity over the longer term.
India, meanwhile, is expected to maintain robust economic momentum, with growth projected at 7 percent in both 2026 and 2027. Strong domestic demand, an expanding services sector and rising investment in AI are expected to underpin its performance.
The contrasting outlooks highlight the challenges facing economies such as Nepal, where growth remains modest and exposure to external shocks continues to pose a significant risk to economic stability.
