Kathmandu- The Asian Development Bank (ADB) on Thursday said Nepal's economy was expected by to grow by 3.5 per cent this year despite the global down-turn.

The ADB's country director Barry J Hitchcock said the projections were based on performance of key economic sectors.

The growth, however, depended the performance of the agricultural sector which contributes nearly half of the country's gross national product, Hitchcock said.

"Given the economic performance of Nepal, we have expected the economic growth would hover around 3.5 per cent this year," Hitchcock said.

The ADB also said it would double the volume of its assistance to more than 200 million dollars each year in the next two years.

"However, the future assistance will be based on the performance of Nepal in implementing the development programmes," Hitchcock said.

"The year 2008 was a good year for the ADB in terms of assistance, as all of our assistance for investments projects are in the form of grants," said Hitchcock.

The ADB said power shortages in Nepal posed a major challenge to development as they had severely hampered economic activities.

Nepal is facing as much as 16 hours of power outage each day after the country's power supplier said it was only able to supply less than 25 per cent of the total electricity demand.

Nepalese officials said one of the main reasons for low power production was the low level of water in reservoirs and rivers that feed the country's hydro-electricity power plants.

Hitchcock said ADB would take the initiative to fund more hydropower projects to deal with the power shortage in the country. (dpa)