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February 2005                                                                            Volume 8 - Number 1

    

 

Tsunami Disaster Updates...

     

 

 

The economic impacts and property damage caused by the Tsunami disaster

By Matt Briston

 

 

The coastal economies in Southeast Asia have taken a beating since the tsunami devastated the region.  The immediate economic impact is concentrated mainly on the industries located in coastal areas, such as farming, fishing and tourism.  Preliminary estimates indicate that 66% of the fishing fleet and industrial infrastructure in coastal regions has been destroyed.

 

In the island nation of Sri Lanka, nearly 400,000 people have lost their jobs and the International Monetary Fund has estimated that nearly $1.5 billion in physical damage has occurred.  Economic growth in Sri Lanka is forecast to drop by 1% to 4% for 2005 as a direct result of the tsunami. 

 

The losses are similar and just as staggering in other hard-hit regions.  However, economists say that overall economic slump will likely recover in a relatively short period of time.  The projected quick recovery is due to the fact that many of the major manufacturing production facilities and major ports were not damaged.  A report released by J.P. Morgan even suggested the tourism industry will likely recover faster than it did during the SARS outbreak.  The financial firm cut its first quarter 2005 growth forecast for emerging Asian countries to 5.9 percent from the previous quarter, from an original forecast for 6 percent growth, but it maintained its second quarter growth forecast at 6.2 percent. 

 

History also suggests that economic activity will recover after it’s initial dip.  Typically after a disaster there is a tendency to be a “V” shaped economic impact.  An upward spike in activity is anticipated due to both government spending and policy response.  The recovery will also be helped by an overall strong economic and political climate.  India, Indonesia, Thailand and Malaysia have all experienced strong growth over the past three years. 

 

While it is still too soon to estimate the total amount of property damage caused, it is expected to be in the tens of billions, if not more.  In terms of insured losses, they will likely be modest relative to the scale of the disaster due to the fact that very few people in the region purchase insurance.  In Indonesia only $8 per capita was spent on non-life insurance in 2003 when by comparison to the United States, $1,980 was spent on non-life insurance during the same period. 

 

 

References:

 

 

For more information or to make a donation to the relief effort visit:

http://www.google.com/tsunami_relief.html