Earthquake costs Nepal $ 1-10 billion, could turn economic clock back: USGS

The earthquake that shook Nepal last Saturday could cost the Himalayan nation anything between $1 billion and $10 billion, says Quartz India quoting the US Geological Survey.

The country was rattled by its worst earthquake since 1934, leaving a trail of devastation in capital Kathmandu and across the country.

The death toll has already crossed 3,000 and is still rising.

The tremors flattened villages, devastated roads and ancient buildings, with some of Kathmandu’s key tourist attractions being reduced to rubble.

The US Geological Survey estimates the cost to the Nepalese economy could be anywhere between $1 billion and 10 billion, a sum that could prove crippling to one of the world’s poorest nations.

The main quake and a series of close to 100 aftershocks, of which one on post-noon Sunday was particularly severe, could put the clock back on Nepal’s economic progress.

The country, which was aspiring to lift itself from its present ‘Least Developed’ status to that of a ‘Developing Country’ by 2022, could now experience a slowdown.

“Almost 100 quakes in the last 24 hours have pushed us 50 years back to the past, in terms of infrastructural damage alone,” Mukesh Khanal, an economist who works in Nepal’s international development sector, has told Quartz India.

He has pointed to ruined highways, the lifeline of the Himalayan country, and the possible damage to many of Nepal’s hydro-power dams that are expected to propel future growth.

“Officials will eventually go and check them, but I fear huge damage. They will have to be torn down and rebuilt, which means reduced electricity production for some years.

“So, I see great challenges for the government and the economy in the coming days,” Khanal has been quoted as saying.

Even before calamity struck, the country’s GDP was expected to record a lower-than-projected rate because of years of political turmoil and a staggering unemployment of 40 percent.

Over the past two decades and a half, the country emerged out of its predominantly agricultural mould with industries and the service sector beginning to play a more visible role.

According to Quartz India, agriculture contributed about 33.7% to Nepal’s $19 billion economy, while the services sector brings in about 52.2% of the GDP.

The services sector includes industries like tourism, hotels and restaurants, trade, construction and real estate. Industries like manufacturing and power contribute the remainder, around 14%.

Nepal’s economy is still highly dependent on its tourism industry, the mainstay of the service sector and largely its economy as well.

But the quake appears to have dealt a crushing blow to its tourism infrastructure.

The country has seven of the UNESCO World Heritage sites, of which four have been badly damaged.

The Dharahara, a 19th-century tower that had long been Kathmandu’s iconic landmark, has been razed to the ground.

Mount Everest, which has been helping Nepal earn critical foreign exchange with hundreds of Western mountaineers queuing up for a climb, will remain a dreaded destination for some time.

The number of deaths on the Everest trail caused by tremor-triggered snow avalanches is likely to be a record for a long time to come.

The World Travel and Tourism Council estimated that, in 2013, tourism generated about seven percent of the country’s total jobs and accounted for 8.2 percent of its GDP.

Its contribution had been forecast to be almost 10 percent in 2024.

But with travel and tourism infrastructure suffering catastrophic damage, the economic outlook has abruptly turned bleak.

Quartz India quotes Alok K Bohara, an economics professor at the University of New Mexico, and founding director of the Nepal Study Centre, who says the 25 to 27 mountainous districts hit by this earthquake are popular tourism destinations.

“Tourism provides more than half a million jobs for the Nepalese,” Bohara told Quartz. He fears there will be a “major impact” on the economy if the earthquake scares away future tourists.

Khanal felt earnings from mountaineering could also be adversely impacted.

“This current incident could reduce the number of tourists wanting to go there in the next few years,” he was quoted as saying.

“Tourism has been extremely important for Nepal,” Gyan Pradhan, a professor in the department of economics at Eastern Kentucky University, told Quartz.

It is the country’s biggest source of foreign exchange after remittances by expatriates.

A fall in tourism earnings could increase the country's trade deficit which already has to meet a rising import bill, feels Pradhan.