Direct economic loss and beyond

E Nobody wants to guesstimate the economic consequences of a disaster, let alone the human cost, but it would be imperative to do so for the planning of the recovery and reconstruction drive. Thus far the estimates are somewhere between USD 84 billion and c. USD 100 billion.

E The human loss is a different matter but there are models that estimate that too based on the death toll in collapsed and damaged buildings in past earthquakes. The results aren’t good. The ratio of survivors living in totally collapsed buildings isn’t very low, but it is low.

E One study finds that 41% of those entrapped in totally collapsed buildings lose their lives instantly. The death toll goes up to 66% if aid is late or if climate conditions are adverse.

EPoseidon was associated with floods and earthquakes

EThere are models that estimate DEL (direct economic loss). There are those that also estimate the indirect loss. The direct GDP loss will be around 1%, but second round effects would also matter.

E Those who deny “Athena’s gifts” – wisdom and the crafts- shall never prosper

E The time frame is important just as it is important during rescue efforts. Because the quake happened in February, it is likely that the calendar year IP and GDP prints won’t be very weak. The recovery should be expected to begin within the calendar year. But there are some problems.

E Money printing is imperative. Naturally there will be another round of inflationary surge. Besides, the region produces c. 15% of agricultural products, 1.5x its share in GDP. Food prices will rise fast.

EThere are analysts who think that the multiplier impact of construction and otherwise spending will give a boost to national economy. While this is generally true, there are caveats.

EFirst, the (local spending) multiplier is often not very high. Second, spending requires funding. Taxes should increase, and borrowings from international sources should go up. Monetary expansion will have a disequilibrium impact because there was ample expansion already ahead of elections.