The Indian Ocean Tsunami: what are the economic consequences?

Overseas Development Institute, London ^ | December 30, 2004 | Dr. Edward Clay

[The Loan Arranger]

1. These notes are based on research by ODI staff on the economic and financial consequences of natural disasters.

2. The geographical scale of the disaster is unprecedented, the loss of life immense and the level of physical damage very significant.

3. However, so far this is not the worst such disaster in modern times - the cyclone and storm surge that hit the coast of Bangladesh in 1970 killed at least 300,000 people. As that disaster showed, many of those killed are poor, and living in places with weak record systems: we will never know the full extent of the loss of life.

4. The immediate relief needs in the Indian Ocean are large and complex, and there will be a long term need for rehabilitation and reconstruction in the areas affected. The disaster is complicated because there are the effects of the earthquake near the epicentre (Aceh) and the widespread effects of the tsunami wave. In effect, there are two disasters, a very severe earthquake as well as the effect of the tsunami.

5. It is important to understand that natural disasters on this scale have less visible, but critically important, economy-wide (macro-economic) effects. This is because of the impact of damage to productive sectors (fishing, tourism) which generate jobs, tax revenue and foreign exchange, but also because government expenditure has to be diverted from other uses.

[The Loan Arranger]

Pretty cold-blooded, but interesting, nonetheless.

[dyed_in_the_wool]

Why is an economic analysis cold-blooded?
Heck, two days ago I realized that there are now going to be huge new flats for bonefishing in these areas which will ultimately lead to a bonefishing tourist boom in the region.

I didn't feel any less sad for the loss of life, however.