When I was reading the report on Nepalese economy in the Asian Development Outlook (ADO) 2006, I could hardly find anything good about the Nepalese economy. While ADB talked about possibilities and potential of the economies of other South Asian countries, it had quite the opposite view about Nepalese economy. First of all, ADB has predicted that in FY (fiscal year) 2006, the growth of the Nepalese economy will be only 2.0%. In FY 2005, it was 2.3%.
According to ADB, there was a decline in paddy production as a result of unfavorable weather. The second major problem for the country is ongoing political conflict. The political conflict has two dimensions. On the one hand, the government is trying to curb a Maoist insurgency in the rural areas. On the other hand, opposition political parties are demonstrating for restoration of democracy in the country. Foreign debt servicing is a major drain for the country and so too is increasing oil price in the international market. As a result of political violence, earning in the tourism sector may get badly hit.
The only good news for Nepalese economy according to ADB report is that in FY 2007, GDP growth may reach to 3.4%. This will happen only if Nepalese government can manage to reach a peaceful solution to the violent conflict.
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