Asian disaster to cause limited impact

Asian disaster to cause limited impact

Agence France-Presse, Sydney

The cost in human life of the Boxing Day tsunamis is appalling by any measure but the economic impact of one of the world's worst natural disasters is likely to be minimal in the longer term, Australian analysts said on Tuesday.

The earthquake and giant waves that shattered coastal regions in 11 countries, killing 150,000 people and leaving millions homeless, has caused little major damage to the economic infrastructure of most of the affected countries.

Even in Thailand and Sri Lanka destruction of the tourism industries is likely to be offset in part by a reconstruction boom while financial markets in the region and beyond have been hardly affected after an initial dip.

BT Financial Group senior economist Tracey McNaughton said supply disruption may fuel inflation problem in the affected countries.

However, while the economic costs of the disaster would be substantial relative to the income of those countries affected, the overall impact would be slim, she said in a note.

"The tsunami hit relatively undeveloped areas and no major industrial or infrastructure facilities were affected," she said.

The impact even on insurance companies was likely to be limited as most of the damaged areas would not be covered by insurance.

BT said the Insurance Information Institute had estimated insured losses at anywhere from several hundred million to a few billion dollars, which compared to insured losses of some US$20 billion following the four recent hurricanes in Florida.

"Reconstruction efforts may be a boon for construction and infrastructure companies," McNaughton said.

AMP Capital Investors chief economist Shane Oliver said reconstruction efforts were likely to offset damage to the tourism industry even in the countries worst affected, such as Thailand and Sri Lanka.

"It's a total disaster for those involved but it's unlikely to have a major impact for the Asian region at all, or have a negative flow-on effect to Australia," AMP Capital Investors chief economist Shane Oliver said.

"There may be the benefit of construction work which may be required but I can't see a major impact on exports overall."

He said Asian stock markets had been little changed since the crisis occurred, suggesting there was unlikely to be any major impact on the region.

"Most of these economies will experience a negative initial impact, say, in the March quarter," Oliver said.

"So in the first three months you might see a dip or a slowdown in gross domestic product growth because you're seeing the initial blow and then as the construction kicks in this will be largely offset."

JP Morgan economist Stephen Walters said the tsunami could be viewed as a positive for Australia in terms of exports and the boost to local tourism it would provide.

Some Australians were now canceling their booked holidays to Asia and were taking them locally instead, he said.

"It's substantial for certain countries like Sri Lanka, Thailand and the Maldives because of the tourism impact, but economies like Indonesia are not tourism areas.

"Once the reconstruction kicks in, this will actually be a boost to growth."