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Submitted by unname1 on Mon, 03/21/2011 - 12:29
Japan’s devastating earthquake and tsunami will depress growth briefly before reconstruction kicks off and gives the beleaguered economy a boost, the World Bank said in a report on March 21.

It was too early to make accurate estimates, the report noted, but added that Japan's experience of recovering from the 1995 Kobe earthquake bodes well for its ability to cope with the triple disaster of this month's earthquake, tsunami and nuclear crisis.

"If history is any guide, real GDP growth will be negatively affected through mid-2011. Growth should pick up in subsequent quarters as reconstruction efforts, which could last five years, accelerate," the World Bank said in a supplement to its semi-annual East Asia and Pacific Economic Update.

"A temporary growth slowdown in Japan will have a modest short-term impact on the region," the Washington-based lender added.

The World Bank did not offer its own forecast about the likely cost of Japan's disaster. Citing private estimates, it said the toll could range from US$122 billion to US$235 billion, or 2.5 to 4 percent of gross domestic product. The 1995 Kobe earthquake caused US$100 billion in damage, or about 2 percent of GDP. Private insurers are likely to bear a small portion of the cost, leaving most to be covered by households and the government, the World Bank said.

Looking at the impact on developing nations in East Asia, the World Bank outlined the potential transmission through trade and finance channels. It noted that Japan accounted for about 9 percent of the region's total external trade. That means a 0.25-0.5 percentage point slowdown in Japanese real GDP growth would lead to a 0.75-1.5 percent drop in exports from developing East Asia, it said.

The disaster drove the yen up last week, on expectations that Japanese retail and corporate investors would start bringing money home for reconstruction efforts, prompting the Group of Seven rich nations to rein the currency in with its first coordinated currency market intervention since 2000.

VOVNews/CNN

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