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Economy

Nepal earthquake may devastate tourism-heavy economy

Buildings around Durbar Square, a Unesco World Heritage site in Kathmandu, lie in ruins. (Photo by Tom Vater)

NEW DELHI -- The damage caused by the earthquake that hit central Nepal on Saturday could be greater than the size of the nation's entire economy, according to some estimates.

     The quake destroyed the historic Dharahara Tower, a 19th-century building in the capital city of Kathmandu, as well as world heritage site Durbar Square. In Bhaktapur, brick walls and wooden temples collapsed. Avalanches in the Himalayas killed around 20 people, including mountain climbers returning to base camp.

     With Kathmandu -- a gateway for the rest of the country -- sustaining major damage, tourism will likely languish.

     Nepal's economy depends on tourism. About 800,000 foreigners visit yearly to see the world heritage sites and Mount Everest. Service industries including lodging account for about half of Nepal's gross domestic product, which is about $19 billion. Spending by foreign tourists amounts to 3% of GDP.

     The U.S. Geological Survey sees a 34% probability that the damage will be between $1 billion and $10 billion and a 29% likelihood that it will be between $10 billion and $100 billion.

     "The Nepal earthquake's economic impact could exceed 20% of GDP," said Rajiv Biswas, the Asia-Pacific chief economist at IHS Global Insight.

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