Earthquake Shines Light on Nepal’s Economic Plight
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
On Saturday, April 25, 2015, the Himalayan nation of Nepal suffered a massive 7.8 magnitude earthquake. The results: at least 3,000 people dead and damage to the tiny nation’s economy that will likely last for years. Yet, for many Westerners, this small nation’s culture and economic climate remains a mystery.
A Glimpse at the Nepalese Economy
On Saturday, April 25, 2015, the Himalayan nation of Nepal suffered a massive 7.8 magnitude earthquake. The results: at least 3,000 people dead and damage to the tiny nation’s economy that will likely last for years. Yet, for many Westerners, this small nation’s culture and economic climate remains a mystery.
A Glimpse at the Nepalese Economy
Nepal’s economy centers on agriculture. Agriculture employs about 75 percent of the nation’s population of 27 million people. Nepal’s Gross Domestic Product (GDP) was about $66 billion in 2014 according to an estimate by the United States Central Intelligence Agency (CIA). Notably, that represents a significant upward trend from $63 billion in 2013 and $61 billion in 2012. However, to put that number in its proper context, 27 million people is about three times the population of New York City (approximately 8.5 million), but only about 5 percent of its GDP.
With such a relatively small GDP compared to its population, it is not surprising that fully one-fourth of the Nepalese people live below the poverty line according to the World Bank. The CIA notes that Nepal is among the poorest and least developed nations in the world, being “heavily dependent on remittances” that account for as much as 22 to 25 percent of the Nepalese GDP. The huge portion of the population living below the poverty line results, at least in part, from an unemployment rate that routinely hovers around 50 percent.
Perhaps not surprisingly, Nepal’s, chief economic partner is its closest neighbor: India. Trade with India accounts for more than 53 percent of Nepalese exports each year. However, the US is a distant second at 9 percent, followed by Germany, Bangladesh, and China at about four percent. In terms of imports, Nepal buys about 50 percent of its goods from India, and 35 percent from China. Tourism accounts for about 8% of the landlocked nation’s economy, thanks primarily to international visitors to the famous Mount Everest.
Effects of the Earthquake
The earthquake’s effects on this fragile economy will likely be devastating. According to the Wall Street Journal, the US Geological Survey believes losses will exceed $20 billion, while economic consultants estimate rebuilding costs at around $5 billion over the next five years. Of course, the threat of earthquakes will likely have a chilling effect on tourism, as well, squeezing several billion more from the cash-strapped nation’s income.
