Nepal – one of the poorest countries in the world – had a rude awakening when a 7.8 magnitude earthquake struck on 25 April 2015. The impact was tragic. Casualties continue to rise, with immense damage to infrastructure. Will the nation be able to pick up the shattered pieces of its economy? Leon Perera, Chief Executive Officer of Spire Research and Consulting shared his insights in China Daily – Asia Weekly.
With the estimated cost of rehabilitation set to hit USD5 billion – a quarter of the nation’s Gross Domestic Product (GDP) of USD20 billion in 2014 – the economic impact of the earthquake is massive.
According to United Nation’s data, 8 million people are directly in the line of fire. Both agriculture – with well over 70% of the population employed in this sector – and tourism have been badly afflicted. Perera opined that the disaster will also impact the nation’s ability to grow and transport fresh food – the agricultural sector alone accounts for 38% of GDP. Moreover, damage to rural and urban infrastructure has been huge. Various factories serving the needs of the domestic market are being evacuated, causing disruption in production.
Apart from agriculture, tourism has suffered a major setback. The Himalayan Tourism industry adds an estimated 8% to the economy – employing more than 1 million people (7% of workforce). It will be severely affected as backpackers, mountaineers and hikers continue to cancel their holiday trips.
Perera pointed out that there is hope in remittances from Nepal’s 2.2 million overseas workers – part of the unskilled construction workforce in Middle-East. In 2014 alone, these workers transferred USD5 billion in remittances back home, amounting to 25% of the nation’s GDP.
Government and international donors including the likes of the Asian Development Bank (ADB) and World Bank will soon initiate a plan of action to assess the damage and rebuilding cost. The ADB has already provided a USD3 million grant to expedite relief efforts.
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