NEW DELHI, Jan. 7 (UPI) -- If the head of the United Nations says that the tsunami devastation is the worst he has ever seen, it must be bad, and bode ill for the world economy. Yet most economists coolly assess that apart from the irrevocable human loss, the disaster will actually boost growth in the region in the long run.
Analysts broadly agree that the $3.5 billion the world has pledged will go a long way in helping Indonesia, Sri Lanka and Thailand get back on their feet.
India, which lost 11,500 people, estimates its economic loss at $1.1 billion and has declined international aid, saying its robust economy can withstand the crisis. New Delhi says its economy will withstand the tsunami lashes and the growth rate of 6.5 percent of GDP will remain unaffected.
The Reserve Bank of India Governor, YV Reddy, Thursday said: "The tsunami calamity would have a negligible impact on the GDP."
The World Bank said earlier this week that it would stick to its forecast of 6.5 per cent growth rate for Indian economy despite the tsunami tragedy.
"We have not estimated the impact of tsunami on the Indian economy. But we can say that it will not significantly change our outlook for fiscal '05," the World Bank's country director for India, Michael Carter, told reporters.
In fact, Carter said that the tsunami was a human tragedy more than an economic catastrophe, Carter said.
Even the worst hit, Indonesia, which reported nearly 100,000 deaths, is expected to stay on course of its annual economic growth in 2005. Australia has pledged $665 million of aid to Jakarta over a five-year period time.
"Given that the energy (mainly oil and natural gas) production facilities in Aceh or Northern Sumatra have survived the tsunami, the overall damage to Indonesia's economy appears to be minimal," a Morgan Stanley report said.
"The (tsunami) disaster is expected to have little impact on the country's economic growth in 2005, and be far less significant than the Bali bombing in 2002," David E. Sumual of Jakarta-based Danareksa Research Institute said.
Since the Aceh province contributes only 2.1 percent of Indonesia's gross domestic product, Indonesia's economy is unlikely to suffer much. The raging ocean has not affected Aceh's most lucrative industries, the oil and gas production facilities
Shipments of liquefied natural gas have reportedly not been disrupted. The oil and gas production sector contributed 51.3 percent of Aceh's economy in 2003.
Sumual said in an article in The Jakarta Post that some studies even suggest that national growth and growth in the affected region picks up in the years after a natural disaster. "Despite the short-term negative impacts, such as slower consumer spending with the infrastructure and trading sectors hit hardest by the quake, the medium-term growth should be stimulated by increases in spending on infrastructure and construction."
The construction, transportation and communications sector, as well as steel and cement industries in the Asian countries are set to benefit from these reconstruction efforts.
However, unlike Aceh, Thailand's beach resorts are a booming tourism industry and the damage is enormous enough to affect the annual growth of the country.
Morgan Stanley has lowered its economic growth forecast for Thailand this year to 5.7 percent from 6.0 per cent, citing the impact of the killer tidal waves that will affect country's fledging tourism industry.
Morgan Stanley said in a report that nearly one-third of foreign tourists arriving into Thailand visit resorts in the provinces that were lashed by the Dec. 26 tsunamis.
"We think Thailand risks achieving only 75-80 pct of the official 13.4 million tourist arrivals forecast for 2005," Daniel Lian, Morgan Stanley's chief Southeast Asia economist was quoted by news reports.
Thailand's Prime Minister Thaksin Shinawatra had said earlier this week that an early tsunami warning system was urgently needed to instill confidence among the millions of foreign tourists who visit the sunny beaches across the country.
"The huge scale of this disaster means the economic impact should not be underestimated," Standard Chartered said in a Dec. 30 report. "Economic growth may be hit immediately, but proactive fiscal policies will help recovery."
Munich Re, the world's largest reinsurer, estimated Thailand's damage would exceed $10 billion, with Thai companies losing about $1.3 billion because of the property destruction and an expected travel slowdown.
Thousands of travel bookings to Thailand have been cancelled with so many hotels and resorts submerged under water, especially in Phuket town. The Tourism Authority of Thailand says the affected provinces may lose up to $250 million a month in tourism revenues.
The Bank of Thailand hopes that tsunami affected businesses will start thriving again with help from its soft-loan program. The central bank's new program calls for offering credit to commercial banks at a 0.01-per-cent interest rate, which they would re-lend to businesses at interest rates as low as 2 per cent.
The second worst-hit island nation of Sri Lanka, which accounted for 41,000 deaths, has asked for around $ 320 million assistance from the International Monetary Fund to partially ease the $ 1.5 billion tsunami reconstruction bill.
"We have formally asked the Fund for over $ 300 million in assistance. About $ 150 million will come through an emergency credit facility and the rest will be a moratorium on our interest payments for this year," Central Bank Governor, Sunil Mendis told a news conference in Colombo.
According to reports in Lanka Business Line, analysts estimate the economic cost of the catastrophe at about $ 14 billion across Asia.
The Paris Club group of creditors meets on Jan. 12 plan to look at a debt moratorium for Indonesia and Sri Lanka -- the two countries hardest hit by a tsunami in Southern Asia.
The world's wealthiest countries have begun freezing or forgiving debt payments of the tsunami battered nations, a move that would allow governments in the affected countries to redirect those payments towards rebuilding.
Japanese Prime Minister Junichiro Koizumi announced Tokyo's intention to provide a debt moratorium for Indonesia and other tsunami-stricken countries as part of its assistance.
"Japan will call on other donors to jointly provide a moratorium for a certain period of time if any disaster-stricken countries need it," he said At Thursday's international donor summit.
Britain, Germany, Italy and the U.S. have also offered debt moratorium for disaster-stricken countries.
But, other than the debt reduction and financial aid, it is the return of tourists that can resuscitate the submerged tourism industry in Thailand and Sri Lanka, famous for tropical beaches.
