Thai Economic Growth Hit By Waves

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Thai economic growth hit by waves

From BBC News

Economists are slashing their growth forecasts

Thailand has become the first of the 10 southern Asian nations battered by giant waves at the weekend to cut its economic forecast.

Thailand's economy is now expected to grow by 5.7% in 2005, rather than 6% as forecast before tsunamis hit six tourist provinces.

The full economic costs of the disaster remain unclear.

The International Monetary Fund said it was too early to say if the disaster would affect the global economy.

The Thai downgrade is small in percentage terms compared with an anticipated 4% fall in the economic output of the Maldives and a 2% fall in the economic output of Sri Lanka, Standard Chartered Bank estimated.

Residential damage

The IMF has said that although the tragedy would be "enormous" to the countries affected, the financial markets have remained relatively calm in the wake of the tragedy.

"There is no clear correlation between the magnitude of disasters in terms of loss of life covered and the damage in financial terms," agreed ANZ economist Barry Coulthurst.

As economists begin to slash their economic growth forecasts for countries affected by the tsunami, the first forecasts of the cost of the tsunami are being made.

The world's largest reinsurer, Munich Re, estimates the costs to come in at about the $14bn (£7.2bn) level.

"Most of the damage, aside from the death toll of course, was in the residences," said David Cohen of Action Economics in Singapore.

"It is a heavy price for the people, but it won't have that much of a subtraction from production capacity, the exception being the tourism industry in Thailand."

Fast turnaround

The cost to the region is expected to come in at a fraction of the cost of the1995 Kobe earthquake in Japan, which killed about 5,000 people but cost $132bn, Australia's ANZ Bank said in a client note.

America's Hurricane Andrew, which killed 50 people in 1992, cost $30bn, the bank added.

Consequently, the region should suffer less in economic terms from this disaster than it did from the Sars epidemic, predicted JP Morgan economist Rajeev Malik.

"The turnaround will be faster this time," he said.

Standard Chartered predicted that an initial "huge economic setback" would be "followed by a strong policy response and economic recovery".

http://news.bbc.co.uk/2/hi/business/4134289.stm