Nepali banking leaders on Tuesday expressed cautious optimism for a modest but continued economic recovery and investment climate.

Sunil KC, president of the Nepal Bankers’ Association, said observing the recent international trends on interest rates, inflation, and the reduction in gross domestic product (GDP) growth forecast, the world is seeing the possibility of a recession. “In such a scenario, Nepal’s tourism and remittances will be directly hit.”

The economic slowdown could result in a reduction in the number of tourist arrivals, he said.

This is not good news for Nepal, which has been seeing its tourism industry recovering after a two-year Covid-19 pandemic-induced lull.

More than 600,000 foreign visitors came to Nepal last year, as compared to 1.2 million in 2019 or before the Covid-19 pandemic.

Any economic slowdown in major global economies and labour destinations might result in lower remittance inflows to Nepal.

However, the global focus towards the usage of renewable energy can enable Nepal to capitalise on its hydropower potential, said KC.

KC claimed that the net profit of commercial banks has not increased. “The profit in the second quarter of the current fiscal year has been on the lower side as compared to the same period in the last fiscal year,” he said.

According to the association, the net profit of commercial banks in the second quarter, excluding the recently-merged Nepal Investment Bank and Mega Bank, was Rs30.19 billion.

The figure stood at Rs 34.21 billion for the same period last fiscal year.

The non-performing loans of the commercial banks increased to 2.29 percent in the second quarter of the current fiscal year from 1.09 percent in the same period last fiscal year, according to the association.

KC, however, claimed the figure was still better if it is compared with other South Asian countries such as Bangladesh, India and Sri Lanka.