The World Bank has lowered its economic growth forecast for Nepal to 3.7% for the current fiscal year, saying the deadly August floods in Rasuwa and nearby districts have badly hurt the country's economy.
The new figure applies to fiscal year 2026-27, which began in mid-July 2026. It is down from the 4.2% the bank projected in April. The cut was announced Tuesday, Oct. 6, in the bank's latest Nepal Development Update.
The bank said the floods, which struck on Aug. 26, disrupted industry and services and damaged key infrastructure, including energy, transport and tourism facilities.
The floods hit the Bhotekoshi-Trishuli river basin, covering Rasuwa and neighboring districts. They damaged hydropower plants, roads, homes and tourism infrastructure.
More than 1,400 people were killed, and losses are estimated at $2.87 billion. Some reports put the toll at 1,455 dead and 5,285 missing. More than 430 megawatts of hydropower capacity was knocked out, according to reports summarizing the bank's findings and official estimates.
Industry and services, especially energy, transport and tourism, were among the hardest-hit sectors.
The World Bank pointed to three main reasons for the lower forecast.
First, the floods disrupted industrial activity and services in and around the affected districts.
Second, damage to hydropower projects, roads and tourism facilities, including the Upper Trishuli-1 project, is expected to reduce output and investment in the short term.
Third, tourism and related services are expected to shrink temporarily because of route closures, safety concerns and damaged facilities.
Before the floods, Nepal's economy had been recovering from the disruptions of the pandemic era and from domestic shocks. The bank's April outlook had already expected moderate growth of around 4% to 4.5%. The new 3.7% figure has been described in some reports as among the lowest in recent years.
The World Bank expects growth to pick up to 5.2% in fiscal year 2027-28 as reconstruction gains pace. It said the recovery should come from several directions.
Rebuilding and rehabilitating damaged infrastructure will boost economic activity. Hydropower and transport capacity are expected to be restored gradually, easing power and logistics problems. Public and donor-funded rebuilding programs are also expected to add demand in construction and related sectors.
The bank's report is titled "Building Back Differently for the Future."
The lower forecast could affect government plans in several ways. It bears on revenue projections, how the budget is carried out and how much the country may need to borrow this fiscal year.
It may also weigh on private investment, particularly in energy and tourism, until rebuilding picks up and uncertainty fades. The gap between the bank's pre-flood and post-flood forecasts also strengthens the case for more low-cost loans, grants and insurance-style support from development partners.
Other questions remain open, including how the growth impact breaks down across agriculture, industry and services, and how much of the expected 5.2% rebound depends on outside financing and the speed of reconstruction.
For now, the forecast shows how a single disaster can slow a national economy. Whether Nepal reaches the projected rebound will depend on how quickly the rebuilding money arrives and how effectively it is spent.
