The tsunami that has devastated coastlines around the Indian Ocean could cost as much as €10 billion and economists have begun to revise down some growth estimates.
Early indications yesterday were that the calamity could shave 0.7 per cent from Thailand's economic growth and in less developed but harder-hit areas such as the Maldives the disaster is seen lopping as much as 4 per cent off growth.
Four days after the world's biggest earthquake in 40 years struck off the Indonesian island of Sumatra, government leaders and economists are still struggling to determine the total damage after giant waves have claimed more than 120,000 lives.
The insurance industry is expected to escape having to pay out huge sums following the tsunami, in spite of the scale of the destruction. Experts said their ability to assess the disaster's economic impact was hampered by a lack of catastrophe models on which to base their estimate.
Munich Re, the world's largest reinsurer, said economic losses would probably exceed €10 billion. However, it said its own losses would be less than €100 million, while rival Swiss Re put its exposure at below €65 million.
German Chancellor Mr Gerhard Schröder has proposed a debt moratorium for tsunami-hit nations Indonesia and Somalia when the Paris Club of sovereign lenders meets on January 20th, a proposal that has been endorsed by Italy and France.
US President George W. Bush said he would consider all requests for aid to affected countries, including the debt moratorium proposal.
But economists also have been quick to note that the financial cost of the disaster will be tiny relative to the human suffering.
Australia's ANZ Bank sent clients a report showing the tsunami at the top of a list of recent world disasters in terms of loss of life. But the tsunami cost will come nowhere near the $132 billion (€97 billion) that Japan's Kobe earthquake, which killed some 5,000 in 1995, is estimated to have cost.
A starker contrast can be seen with Hurricane Andrew, which killed 50 people in 1992 but cost around $30 billion, ANZ said.
Mr David Cohen of Action Economics in Singapore agreed. "Most of the damage, aside from the death toll of course, was in the residences and 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."
Economists said Thailand has been dealt a bigger blow than its neighbours from a direct hit to tourism revenues from the Phuket and Krabi provinces. The others - Indonesia, Sri Lanka or India - could use foreign aid to rebuild their coasts.
Standard Chartered Bank estimates gross domestic product in Sri Lanka and the Maldives will be hurt the most. It predicts the tsunami will wipe out 2 and 4 per cent respectively from 2005 GDP.
But Mr Rajeev Malik, an economist with J.P. Morgan, expects the region overall will suffer less than it did during the SARS epidemic last year, when people shunned restaurants and suspended travel, causing economic contractions in Singapore, Hong Kong and other Asian countries.
"The turnaround will be faster this time," he said.
A study of Kobe, SARS and the 2002 bombing in Indonesia's Bali resort showed major disasters tended to have V-shaped economic impacts, according to a Standard Chartered report.
"Clearly the scale of this disaster is far greater and impacts more countries, but the profile may well be the same; initially, a huge economic setback, followed by a strong policy response and economic recovery," the Standard report said.
