Nepal’s slowing economy set for free fall without global help
US SURVEY INITIALLY ESTIMATED ECONOMIC LOSSES FROM TEMBLOR AT 9% TO 50% OF GDP
Nepal’s economy was already slowing before the 7.8-magnitude earthquake killed thousands from the capital to the unforgiving slopes of Mount Everest. Now near-term growth is set to contract without the world’s help.
“Kathmandu is central to the nation’s economy, and it’s crippled,” Madhukar SJB Rana, a former finance minister, said in a phone interview on Sunday after spending the night outdoors amid countless aftershocks. “The extent of the impact depends both on the magnitude of the disaster but also on the resources and capacity to cope. We don’t have that.”
So far about 2,900 people have died, a figure set to climb as rescuers dig through rubble. The quake split roads, downed power lines, toppled buildings and triggered avalanches that killed at least 19 on Everest — a key driver of tourism in an economy also dependent on agriculture and remittances.
Nepal, one of Asia’s poorest countries whose gross domestic product is smaller than any of the 50 US states, has little scope to fund a major reconstruction effort on its own. Even before the quake, the Asian Development Bank estimated that it needs to spend about four times more than it currently does annually on infrastructure through 2020 to attract investment.
The US Geological Survey initially estimated economic losses from the temblor at 9 per cent to 50 per cent of gross domestic product, with a best guess of 35 per cent.
It’s too hard for now to tell the extent of the damage and the effect on Nepal’s GDP, according to Hun Kim, an ADB official.
“Initial efforts will be focused on making sure people are safe following this tragedy,” Kim, who heads the lender’s South Asia department, wrote in an email. About 40 per cent of the country has been affected by the quake, he said.
ADB grant
The ADB said yesterday it will provide a $3 million (Dh11 million) grant to Nepal for immediate relief efforts, and up to $200 million for the first phase of rehabilitation.
Nepal has a small stock exchange and its currency is pegged to India’s rupee, making it one of the world’s best performers last year. It was unclear if financial markets or banks would open, with some banks in Kathmandu shut. “This is a very catastrophic event in a very poor nation,” Rajiv Biswas, chief Asia economist at IHS, told Bloomberg Television interview yesterday. “The cost of reconstruction over the next few years will be massive.”
Rebuilding costs could “easily exceed” $5 billion, which would be about 20 per cent of Nepal’s gross domestic product, said Biswas.