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Asian economy seen wounded by tsunami tragedy
1/2/2005
The tsunamis that ravaged the coasts of the Indian Ocean inflicted at least hundreds of millions of dollars in damage and will likely force a rethink of 2005 spending priorities, economists said.
The killer waves triggered by the world's most powerful earthquake in four decades were particularly brutal to tourism and fishing, two of the most lucrative industries for southern Asia.
there was relief, that save for some damage in Male, the Maldives capital, the tragedy mostly spared the major cities, where national infrastructure could have been torn apart and the death toll would have been even more catastrophic.
"First and foremost, this was a human tragedy," said Glenn Maguire, chief economist for Asia and Australasia at French investment bank Societe Generale.
"With the enormous displacement of people, which has not been of this magnitude in some time, there will be a serious relaxation of fiscal policy, not just for those countries directly affected but those that will open up their aid budgets," he said.
"The economic impact of it will certainly be large but it should not be enough to derail the momentum of the region in 2005."
While there were few hard figures yet on how much infrastructure was destroyed, the Associated Chambers of Commerce and Industry of India estimated that the country suffered at least 450 million dollars in damage.
Malaysia's state Public Order and Traffic Chief Lee Shuan Fat put losses in his country's worst-hit northern state of Kedah at 5.61 million dollars.
Malaysian fisheries director-general Junaidi Che Ayub said initial figures showed about 1,000 fishermen in the Penang area were affected by the tsunami and that damage to the industry would be "significant."
"We are only beginning to grasp the magnitude of the disaster in terms of loss of life, material damage and economic impact across the region," World Bank president James Wolfensohn said.
Experts believe that in the long term, the worst hit nations in raw economic terms may be Thailand and Sri Lanka given the damage to their important and growing tourism industries.
In India, by contrast, the tragedy was most savage to relatively undeveloped areas such as the Andaman and Nicobar islands.
Chua Hak Bin, senior regional economist at DBS Bank in Singapore, estimated damage in Thailand could be in the region of 100 million dollars, meaning 0.1 percent of its economic growth would be shaved off.
But considering the massive loss of life, including at Thailand's top resort Phuket, the economic impact is "quite limited," Chua said.
"This is sort of a freak accident," Chua said. "It hasn't hit the critical infrastructure of the cities."
Naoyoshi Noguchi, Asia-Oceania director for overseas research development at the Japan External Trade Organization, said one concern for exporters was the closing of the southern Indian port of Madras, which could prove serious if prolonged.
But southern India's star export industry, information technology, is not dependent on sea shipments and the more important port of Colombo in nearby Sri Lanka did not suffer major damage.
However, the scenes of death and mayhem on Sri Lanka's beaches were the worst possible image for the island, which was set to see a record 570,000 foreign tourists in 2004 after a nearly two-year truce with Tamil rebels.
Instead of beckoning tourists to discover the palm-fringed tropical island, Sri Lanka was on Tuesday asking foreigners not to come as it struggled to accommodate thousands displaced before sending them back on charter flights.
Economists said the tragedy was unlikely to discourage either tourists or business travelers permanently as few people other than the most traumatized are fearing a new round of tsunamis.
"In the long-run, these natural disasters are viewed as a one-off, not the same way terrorist attacks are," Maguire said.
Noguchi predicted the impact to Asia's economy would be smaller than during the 2003 outbreak of SARS, or Severe Acute Respiratory Syndrome, which killed almost 800 people, mostly in Hong Kong and China.
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AFP
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