Asia Economies May Escape From ‘Almost Unprecedented’ Disasters

Oct. 3 (Bloomberg) -- Asia-Pacific countries may escape major economic damage from an “almost unprecedented” series of natural disasters that struck the region in the past week.

“There will be minimal economic impact because the regions affected are not major sources of growth,” said Song Seng-Wun, an economist at CIMB-GK Securities Pte in Singapore. “For now, this is a human rather than economic story. In fact, there could be a mild boost from reconstruction works.”

Typhoons in the Philippines, Vietnam and Cambodia, an earthquake in Indonesia and a tsunami in the South Pacific highlighted the region’s position as the world’s “disaster hot spot,” according to the United Nations. Asia is leading the global economy from its deepest recession since the 1930s after policy makers slashed interest rates and governments announced more than $950 billion of stimulus measures.

“I don’t think these idiosyncratic shocks will throw the Asian recovery story off course,” said Wai Ho Leong, Barclays Capital’s senior regional economist in Singapore. “We have seen the experience of Sichuan and more recently in Taiwan. Over an extended time period, there was no discernible impact on gross domestic product on a net basis.”

At least 1,100 people were killed by a 7.6-magnitude earthquake that struck off Indonesia’s Sumatra island on Sept. 30, according to the UN. The toll will probably rise as rescuers reach damaged areas, John Holmes, the agency’s humanitarian chief, said Oct. 1.

‘Disaster Hot Spot’

Tropical Storm Ketsana devastated Manila and other parts of the Philippine island of Luzon on Sept. 26, leaving 293 people dead and as many as 676,235 in evacuation centers. In the South Pacific, a recovery operation is under way after a tsunami killed more than 150 in the Samoan islands.

“It is almost unprecedented for any region to experience so many disasters over such a short period of time,” UN Under- Secretary-General Noeleen Heyzer said in a statement. “The disasters of the past week remind us that Asia-Pacific is the world’s disaster hot spot.”

China’s southwest Sichuan province is spending more than 3 trillion yuan ($440 billion) to rebuild houses, highways and railways destroyed by a 7.9-magnitude earthquake that struck in May 2008, according to Vice Provincial Governor Wei Hong. The World Bank estimated direct economic losses from the temblor that killed at least 87,000 people at 844 billion yuan.

Reconstruction spending after Taiwan’s deadliest typhoon in 50 years in early August may improve the island’s economic performance, the statistics bureau said Aug. 20. Planned outlays on typhoon-hit areas would result in the economy contracting 3.75 percent this year instead of 4.04 percent, the agency said.

Reconstruction Projects

“Rebuilding has an accelerating effect on GDP,” said Barclays’ Leong. “Typically, it more than makes up for such shocks. The overall impact on the economy might even be positive, if we factor in rebuilding programs.”

Indonesia has 100 billion rupiah ($10.4 million) ready to be spent on relief efforts after this week’s quake on Sumatra and has set aside an additional 150 billion rupiah as backup funds, Finance Minister Sri Mulyani Indrawati said Oct. 1.

“The quake has implications for the economy due to the damage on infrastructure. West Sumatra is a region with an important economic role,” Sri Mulyani said. “The government is serious in dealing with this infrastructure problem.”

Indonesia’s economy may not suffer too much from the temblor as the three western provinces affected -- West Sumatra, Bengkulu and Jambi -- contribute less than 3 percent of the country’s GDP, said Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta.

Philippine Evacuations

“From a national perspective, the disaster in Sumatra will not significantly impact Indonesia’s economy,” Arman said.

The Philippines yesterday started evacuations as a second typhoon headed for Luzon. The government has declared a “state of calamity” for the Manila metropolitan region and other parts of Luzon island as well as Mindoro island to the south.

“It is too early to assess the impact on the Philippines economy,” said Dennis Botman, the International Monetary Fund’s country representative in the Philippines. “But early indications suggest that the economic costs pale in comparison to the human suffering caused by this calamity.”

The damage caused by Tropical Storm Ketsana may reduce Philippine economic growth by at least 0.043 percentage points, Economic Planning Secretary Augusto Santos said Sept. 29. Growth may slow to a range of 0.7 percent to 1.7 percent compared with a target of 0.8 percent to 1.8 percent, he said.

‘Miniscule’ Effect

The “surprisingly miniscule” impact from the storm was “because the calamity spared much of the country’s agricultural and manufacturing heartlands,” said Anton Periquet, an analyst at Deutsche Bank AG in Manila. “Banks, brokers, call centers, shops and even the entertainment industry -- a large part of the metro Manila economy that was hit by the typhoon -- can function as long as the telephones work.”

The heaviest rains in Manila and surrounding provinces in more than four decades may still reduce the nation’s rice production in the October-December harvest by about 3 percent, the Department of Agriculture said Oct. 1.

“The Philippines is no stranger to natural disaster,” said Deutsche’s Periquet. “The country has always bounced back.”