Nepal Earthquake: Massive earthquake flattens Nepal's economy for years to come

Nature is a great leveler, but this time around, it was nothing short of cruel! Even as Nepal was trying to get back on its feet after a decade-long civil war, the massive 7.9 magnitude earthquake that ravaged through the country, is also leaving behind a crippling multi-billion dollar post-quake reconstruction bill that will set it back by years.

Saturday's 7.9-magnitude quake devastated much of the capital Kathmanduand killed more than 3,700 people in Nepal's deadliest disaster for more than 80 years. Racked by political instability since a deadly war with Maoist rebels ended in 2006, earthquake-prone Nepal must now cope with the added burden of a massive rebuilding effort that its shattered economy will not be able to afford on its own.

"The Nepal earthquake has had a devastating impact on the economy of Nepal, which is a very poor nation and has extremely limited capacity to finance relief efforts and reconstruction from their own resources," said Rajiv Biswas, Asia-Pacific chief economist at business research firm IHS.

"The total long-term cost of reconstruction in Nepal using appropriate building standards for regions vulnerable to severe earthquakes could exceed $5 billion, which is around 20 percent of Nepal's GDP," he added in a note.

"Massive international disaster relief and rescue efforts will be needed urgently, as well as large-scale international financial and technical assistance for long-term reconstruction of the economy," Biswas said.

Nepal has an annual per capita GDP of only $1,000 per person, according to IHS, with many families living in poverty -- relying on agriculture and increasingly tourism to make ends meet.

Agriculture is the economy's biggest sector, employing over 70 percent of the population and contributing 33 percent of GDP, according to the trading economics website.

Saturday's quake, the strongest to hit Nepal since 1934 when 10,700 people were killed, ripped apart infrastructure, destroying roads and buildings and paralysing communications.

Asian Development Bank official Hun Kim estimated that 40 percent of the country was affected.

"On a personal level, people have lost their houses and assets. The government will have to quantify the loss of infrastructure," Kathmandu-based economist Bishamber Pyakurel told AFP, describing the impact on the economy as "grave".

"The growth rate of the country will be hit. Agriculture contributes over 30 percent of our GDP and with 36 districts affected, it is unlikely that our growth projections will be met. Difficult times are ahead," Pyakurel said.

The economist said food prices would start to rise, putting further strain on traumatised families who have been left with nothing. "The demand for essential goods is rising but there is a supply constraint," he said.

Nepal's GDP grew 5.48 percent last year, the country's central bureau of statistics showed on the trading economics site, much improved from the 0.16 percent recorded at the height of the Maoist insurrection in 2002.

The civil war left more than 16,000 dead. The government has begun to get the country back off its knees but political bickering has prevented the drafting of a new constitution.

Crucial to the growth increase has been tourism. Nepal attracted almost 800,000 foreign visitors in 2013 -- many of them climbers heading straight to Mount Everest but also less adventurous tourists seeking the rich cultural history of Kathmandu.

The capital now lies partly in ruins, with tens of thousands of residents living in tents after the quake turned their homes into piles of rubble.

The historic Dharahara tower, a major tourist attraction, was among the buildings which crumbled as Kathmandu shook violently, flattening high-rises and cutting off power.

"Kathmandu is central to the nation's economy, and it's crippled," Madhukar Shumsher Rana, a former Nepal finance minister, told Bloomberg News.

The quake also triggered an avalanche on Everest, the world's highest mountain, which buried part of base camp and killed at least 18 people.

Dollars from mountaineers provide much-need revenue but this vital source of income could soon be choked off for the rest of 2015 at a time when the country needs it most.

"It is possible that climbing might not continue this year. However, there has been no official decision," said tourism department head Tulsi Gautam.