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Nepal’s economy is projected to grow by 3.6 percent in fiscal year 2026/27, remaining below the 4 percent mark for the second consecutive year, as rising international oil prices and geopolitical tensions weigh on economic prospects, according to the International Monetary Fund (IMF).

In its latest World Economic Outlook report released on Tuesday, the IMF has projected Nepal’s economic growth to improve marginally to 3.7 percent in FY 2027/28. The projection indicates that the country’s economic expansion will remain subdued over the next two years.

The IMF also expects inflationary pressure to intensify after easing in 2026. Consumer price inflation in Nepal is projected to decline from 4.1 percent in 2025 to 3.1 percent in 2026 before climbing to 5.8 percent in 2027.

Rising oil prices in the international market pose a significant risk to Nepal’s economic outlook, given the country’s heavy dependence on imported petroleum products and other essential goods. The IMF has warned that escalating conflicts in the Middle East and disruptions to energy supplies could push up production and transportation costs, placing additional pressure on domestic prices.

The report noted that crude oil prices had risen above $100 per barrel amid the ongoing Middle East conflict. A further escalation of the conflict could push prices to $130 per barrel, potentially weakening global economic growth and intensifying inflationary pressures.

Nepal, which relies heavily on imports to meet its energy requirements, remains vulnerable to fluctuations in global commodity prices. Higher fuel costs could affect businesses, household expenditure and overall economic activity.

At the global level, the IMF projected economic growth of 3.1 percent in 2026, down from an estimated 3.5 percent in 2025. Growth is expected to recover slightly to 3.4 percent in 2027.

Despite geopolitical tensions and disruptions in energy markets, investment in technology, particularly artificial intelligence (AI), has helped sustain economic activity in several major economies. Spending on AI-related infrastructure, tools and technological development has supported investment and productivity growth.

However, the IMF cautioned that the benefits of technological advances have been unevenly distributed, with countries having limited access to AI development and investment opportunities potentially missing out on gains in productivity and economic expansion.

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 its economic performance. The IMF noted that technological investment could strengthen productive capacity and improve productivity over time.

India is expected to maintain stronger growth, with its economy projected to expand by 7 percent in both 2026 and 2027. Robust domestic demand, an expanding services sector and increased investment in AI are expected to underpin the country’s economic momentum.

The IMF nevertheless warned that risks to the global outlook remain tilted to the downside. A prolonged or intensified conflict in the Middle East could further disrupt energy supplies, raise commodity prices and weaken economic activity worldwide.

For import-dependent economies such as Nepal, sustained increases in oil prices could compound existing economic challenges, while rising inflation could erode household purchasing power and increase costs for businesses. The combination of slower growth and renewed price pressures is likely to remain a key concern for the country’s economic outlook.