Growth in South Asia projected to rise to 6.0% in 2025 and 6.2% in 2026

KATHMANDU, MAY 21: Nepal’s economic growth is expected to accelerate in both fiscal years 2025 and 2026, driven by robust consumption supported by higher remittance inflows, moderate inflation, and increased private and public investments. These factors will underpin economic activity and help Nepal navigate regional challenges, according to the Asian Development Bank (ADB). 

Across South Asia, the subregion is poised to remain the fastest-growing, with growth forecasted to rise from 5.8% in 2024 to 6.0% in 2025 and further to 6.2% in 2026, supported by strong domestic demand in several economies, the ADB states. 

In neighboring India, growth is projected to accelerate to 6.7% in FY2025 and 6.8% in FY2026, fueled by falling inflation, monetary policy easing, improved agricultural output boosting rural incomes, and favourable fiscal measures such as tax cuts for middle-income households.

Bhutan’s GDP growth is forecast to jump sharply to 8.5% in FY2025 from 5.5% in FY2024, driven by increased investment in hydroelectric power and a surge in construction activities, before moderating to 6.0% in FY2026.

Meanwhile, Bangladesh’s economy faces headwinds from political instability and supply chain bottlenecks, which are expected to weigh on growth in FY2025. Sri Lanka’s economic recovery, as per the ADB, will continue, though at a slower pace, with household consumption remaining subdued due to weak purchasing power and tight fiscal policies, alongside currency depreciation caused by resumed debt servicing.

In the Maldives, growth is projected to moderate despite solid contributions from tourism-related sectors. Pakistan’s economy will maintain steady growth at 2.5% in 2025 and 3.0% in 2026, backed by reforms aimed at strengthening private investment, according to the ADB.