The 2015 earthquake and a lost year of Nepalese growth

On 25 April 2015, a magnitude-7.8 earthquake killed nearly 9,000 people and damaged or destroyed hundreds of thousands of buildings across central Nepal, hitting an economy that had just adopted a new constitution and was expected to accelerate. Nepal Rastra Bank's own annual report for fiscal year 2015/16 records how sharply those expectations were disappointed: despite broadly stable macroeconomic indicators, economic growth came in at just 0.6%, far below what had been anticipated before the disaster, as reconstruction delays, disrupted trade and a prolonged border blockade compounded the earthquake's direct damage to housing, tourism and agriculture. The slowdown was temporary rather than structural: remittance inflows, largely unaffected since they originate from Nepalese workers abroad rather than domestic production, continued to cushion household incomes and the balance of payments throughout the disruption, and growth rebounded strongly within two fiscal years as reconstruction spending finally picked up. The episode illustrates how a single natural disaster can erase most of a year's expected output in a small, geographically exposed economy even while its external accounts, propped up by remittances, remain comparatively stable.