Nepal's economy is in transition.

The World Bank says that Nepal has "huge potential as it [is] wedged between India and China, two among the world's fastest growing economies." The Bank added, "Nepal now faces a historic moment of great opportunity and hope."

These remarks were made by the World Bank's managing director and were reported by Reuters on February 16, 2007.

The hope and opportunity come after official cessation of hostilities between the government and Maoist rebels with an agreement signed in November 2006. The agreement ended a particularly destructive decade long conflict. The rebels have agreed to join the country's parliamentary process.

Clearly, the end of a shooting war promises greater stability and relief for the country's consumers and the economic uncertainty that the conflict engendered. But all is not exactly quiet for the Nepalese economy. The Daily Times (Lahore) reported on March 7, 2007, that a transportation strike was turning into a general strike. A Nepalese official told the Times that, "This strike is damaging to both [the] economy and social life for the people."

The consensus is, though, that the strike is evidence of the transitional nature of the Nepalese economy. Other consequences of the transition were noted by the Nepal Rastra Bank (NRB), the country's central bank, in a mid-fiscal-year review of the economy. On February 21, 2007, The Rising Nepal (Kathmandu) passed along the NRB's opinion that, "the economic growth rate has remained low and there has been some pressure on the inflation rate."

The International Monetary Fund (IMF) estimates that the growth rate in Nepal will be considerably above the 2006 growth rate in 2007. In 2006, says the IMF, Nepal grew 1.9 percent, and in 2007 Nepal is expected to grow 4.2 percent.

In a separate report released in mid-2006, the NRB presented figures that showed private consumption increasing 11.2 percent in FY 2005/2006, compared with 7.5 percent in 2004/2005. Retail sales also grew. In FY 2005/2006, retail sales increased 11.9 percent compared with 0.9 percent in 2004/2005-a clear sign of consumer relief at the cessation of hostilities.

INVESTMENT AND JOBS ARE THE KEY TO NEPAL'S ECONOMIC RECOVERY

The population growth rate for Nepal is above the regional average, due in part to a birth rate of 31 per thousand inhabitants, which is above the average of 25 per thousand for South Central Asia. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve further in 2007. Unemployment is running about 42 percent (2004), and this continues to undermine consumer confidence.

Nepal's population reached 26-million people mid-2006, which amounted to just 1.5 percent of South Central Asia's 1.6-billion inhabitants. According to data released by the Population Reference Bureau (PRB), Nepal's population will reach 36-million by 2025. Also, according to that source, Nepal is going to have a population of 48-million people in 2050.

The PRB revealed that a low 14 percent of Nepal's population lived in urban areas during 2006, and that the country's population density is 457 people per square mile. Nepal is about the same size as Bangladesh in land area, but Bangladesh has over 5.5 times as many inhabitants. Another source of demographic data, the CIA's World Factbook, indicates that 39 percent of Nepal's population was birth to 14 years old in 2006, while 57 percent was 15 to 64 years old, and 4 percent of the populace was 65 years of age and over.

CIA statistics revealed that the country's population growth rate was 2.17 percent in 2006. According to the United Nations Population Division, in the year 2050, 24 percent of Nepal's population will be birth to 14 years old, while 64 percent will be aged 15 to 59, and 12 percent of the populace will be 60 years of age and over.