Saturday, March 7, 2015

Realizing the demographic dividend in Nepal

This blog post is adapted from Macroeconomic Update Nepal, February 2015.

The Central Bureau of Statistics (CBS) released new estimates for population for the next twenty years based on Population Census 2011. It shows that by 2031, Nepal’s population will hit 33.6 million in 2031, comprising of 51.4% female and 48.6% male. Similarly, urban population will reach 30.2% of total population in 2031 from 17.1% of total population in 2011. The country will still have a substantial share of population (69.8%) residing in rural areas as defined in the Population Census.

Total population is projected to grow by 1.4% until 2018, 1.3% over 2019-2021, 1.2% over 2022-2023, 1.1% over 2024-2025, 1.0% over 2026-2027, 0.9% over 2028-2029, and 0.8% over 2030-2031. The urban and rural population growth rates are projected to follow similar path.

The share of population of 15-49 age cohort is projected to increase from 50.6% in 2011 to 55.5% in 2031. Furthermore, the share of population below 24 years is projected to peak at 51.5% in 2018 and then gradually decline to 41.8% in 2031. The share of youth (15-24 years as per the UN definition) is projected to peak at 21.3% of total population in 2020 and then decline gradually to 16.4% of total population in 2031. According to the definition of youth prevalent in Nepal, the youth population (16-40 years) stood at 40.3% of total population 2011. This is expected to increase to 43.3% of total population in 2031.

The declining population growth rate and dependency ratio, rising life expectancy along with declining fertility and child mortality, and gradually peaking working age population or that of the youth population indicates that the country is reaching the unique point where it could exploit this demographic change to spur economic growth, provided that effective public policy is implemented. Else, this demographic bulge will continue to be a burden to the economy, resulting in more temporary out-migration for work overseas.

The economy needs to generate enough job opportunities by investing heavily in infrastructure (energy, transport, ICT, urban development) and human capital (quality and relevant education and healthcare) to galvanize the youth into building a strong and resilient economy, which should be characterized by a meaningful structural transformation and an accelerated inclusive economic growth process. The country will also have to effectively utilize knowledge, experience, and technology of other successful counties to ensure that such a process picks up high momentum in this short window of opportunity. Then only the youth will be able to more productive and competitive during their working years.