Kathmandu, Oct 6 (IANS): The devastating August floods in Nepal are expected to have a material negative impact on the country’s economic prospects in the short term, the World Bank said on Tuesday as it lowered its economic growth projection for the Himalayan nation.
The global development lender said Nepal’s economic growth is projected to slow to 3.7 per cent in the current fiscal year 2026-27, which began in mid-July, from the 4.2 per cent projected in April, reflecting disruptions to industry and services.
In its report titled Nepal Development Update: Building Back Differently for the Future, released on Tuesday, the World Bank said the August 2026 floods are expected to affect Nepal’s economy through four primary transmission channels: energy, transportation, trade and tourism.
“Agriculture and banking and insurance are also channels through which the economy would be affected, but with relatively lower potential impact,” it said.
According to the bank’s report, energy, particularly hydropower, is the most critical transmission channel. The floods affected 12 hydropower projects, including seven operational projects with a combined capacity of 256.1 MW and five projects under construction with a combined capacity of 395.02 MW, as well as a 25 MW solar facility.
“Damage to transmission infrastructure disrupted an additional 149.6 MW, bringing total affected generation and transmission capacity to approximately 430.7 MW, equivalent to 10.6 per cent of Nepal’s FY26 installed hydropower and solar capacity,” the bank said.
Transportation and trade are other key transmission channels, given the concentration of Nepal’s international and domestic trade along a limited number of corridors, according to the World Bank.
As many as 1,455 people have been confirmed dead and 5,285 remain missing to date following the disaster, which destroyed communities and infrastructure along the Bhotekoshi and Trishuli river corridors, according to the National Disaster Risk Reduction and Management Authority.
According to the Rapid Disaster Needs Assessment (RDNA) report prepared by a joint technical team of the National Planning Commission and the National Disaster Risk Reduction and Management Authority, the recent floods are estimated to have caused physical damage worth 274.48 billion Nepali rupees (about 1.93 billion US dollars), while overall losses and damages have reached 408.28 billion rupees (about 2.87 billion US dollars).
The preliminary assessment suggests that more than 723 billion rupees will be required for the reconstruction and recovery of affected infrastructure and assets. The Nepali government is now working on a Post-Disaster Needs Assessment involving a more extensive assessment of the damage.
The World Bank said industry is expected to be the main drag on growth, reflecting extensive damage to hydropower, solar energy, electricity transmission and transport infrastructure, which will constrain electricity generation and production and disrupt the movement of goods.
“For instance, it took nearly a year to fully restore generation at the 111 MW Rasuwagadhi Hydropower Project, which was severely damaged by the July 8, 2025, Bhotekoshi (Lhende River) flood,” it said.
The same project has once again been badly affected by the August floods.
“This illustrates the potential for flood-related damage to disrupt electricity supply and impose substantial reconstruction costs,” the global development lender said.
“Hydropower construction in areas not directly affected by the flood is expected to continue, although projects could face higher insurance premiums, financing reassessments, and cost overruns,” it added.
“Services are expected to be affected through disruptions to trade, transport, tourism, and financial activity, while agricultural losses are expected to have limited effects on aggregate output but significant impacts on livelihoods in affected areas,” the bank said in the report.
Tourism is expected to face a potentially prolonged impact, reflecting both physical disruptions and heightened perceptions of travel risks, according to the report.
It said more than 200 hotels and restaurants were damaged across the affected districts, while access to major trekking and pilgrimage destinations—including Langtang, Gosaikunda and the Kailash Mansarovar corridor—has been disrupted.
However, economic activity is expected to gradually recover in fiscal year 2027-28 as reconstruction activity begins to gain momentum and damaged infrastructure and productive capacity are progressively restored, the bank said.
