Tsunami: Capital cost minimal
05/01/2005 07:55  - (SA)  

Claims may cost insurers $10bn Asian economies 'intact' Human tragedy outweighs costs

Singapore - The tsunami havoc could add up to an overall capital loss of US$15bn in India, Indonesia, Sri Lanka and Thailand, a Citigroup report said on Wednesday.

But the US banking firm shared the consensus view that total economic costs will be marginal compared to the human losses.

"Economic losses at the aggregate level are likely to be limited, especially compared with the effects of the SARS epidemic in 2003, affecting chiefly agriculture, fisheries and tourism, and not manufacturing," Citigroup said.

Although the August 26 earthquake-driven tsunamis have destroyed the livelihoods of millions of families, economists concur they will shave only a few points off economic growth this year.

India's capital stock, production facilities and infrastructure took the biggest hit, with losses amounting to $6.5bn, the report said.

The capital loss is not necessarily a sustained loss of output, Citigroup said, as investment to replace lost capital would boost output.

"The net impact of the tsunami will depend on how quickly reconstruction takes place," the report said.

Goldman Sachs, in a separate report, said, "The core manufacturing axis in Asean - Bangkok, West Malaysia and Singapore - is completely unaffected."

The tsunami "was a one-off shock to the tourism sector in Thailand", the report said. "We would not expect the impact on Thai tourism to be larger than the bird flu virus scare of the first quarter of 2004," it added. - dpa

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