The World Bank says in a report the impact on East Asia and the Pacific is likely to be brief, but the rebuilding effort could last five years and positively impact economic growth.
In fact the bank, which says the impact could cost Japan as much as $US235 billion, sees the three disasters as only briefing depressing activity before reconstruction kicks off and gives the beleaguered economy a boost.
The bank didn’t provide an estimate of the damage, but cited the range of private estimates.
That, the Bank said in an update to its semi-annual East Asia and Pacific Economic Review, that the quake will "have a modest short-term impact on the region."
The report, titled Securing the Present, Shaping the Future, was finalised in the weeks prior to the disaster in Japan. The update was written last week.
However, the analysis points to uncertainties and ongoing challenges posed by the unfolding situation involving nuclear reactors in Japan, which will benefit countries like Australia (see accompanying report).
While it was too early to make accurate estimates, the report noted, 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 today in a supplement
The bank said that according to private estimates, the toll could range from $US122 billion to $US235 billion, or 2.5% to 4% of gross domestic product.
The 1995 Kobe earthquake caused $US100 billion in damage, or about 2% of GDP.
Private insurers are likely to bear a small portion of the cost, leaving most to be covered by households and the government.
In fact the Nikkei newspaper yesterday reported that Japanese insurers had estimated that payouts for earthquake coverage taken out by individuals would total a record 1 trillion yen, eclipsing the 80 billion yen from the Kobe quake.
US insurer AIG has already forecast $US700 million in losses as an early estimate.
And Swiss Re has now given a first estimate of losses of $US 1.2 billion, net of retrocession and before tax, from the earthquake and the tsunami in Japan.
The World Bank said the impact on the region could be varied.
For example it said Japan accounted for about 9% 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% drop in exports from developing East Asia.
"On trade, if the Kobe earthquake of 1995 is to serve as a historical guide, Japan’s trade slowed only for a few quarters; Japanese imports recovered fully within a year and exports rebounded to 85 percent of pre-quake levels," the World Bank said.
"But this time around, disruption to production networks, especially in automotive and electronics industries, could continue to pose problems."
"Japan is a major producer of parts, components, and capital goods which supply East Asia’s production chains.
"In Thailand, exporters of cars report that current supplies of components imported from Japan will last through April."
(Thailand exports Hondas and Toyotas to Australia, for example that are assembled from parts shipped mostly from Japan and other sources)
"Some plants in Japan are already experiencing shortages in parts sourced from the northeast.
"In electronics, Korean firms are facing higher prices for memory chips, in part because Japan accounts for up to 36 percent of global production and that production is now disrupted.
"Prices have already risen by more than 20 percent in some categories.
"China and the Philippines are more connected to developments in Japan than the rest of East Asia; in the Philippines, electronics exports account for two-thirds of total exports," the World Bank said.
The bank said energy costs might also rise as countries review their nuclear power plans, although that could benefit energy producers such as Indonesia, Malaysia and Vietnam.
As for finance, one-fourth of developing East Asia’s long-term debt is denominated in yen, so a one percent appreciation of the Japanese currency translates into a $US250 million increase in annual debt servicing for the region, the World Bank said.
Looking back on 2010, the report characterizes the region’s output growth as surprisingly strong, with real GDP growth amounting to 9.6% for the year as a whole, the bank said in the major part of the report.
"Real GDP growth in East Asia has been moderating after a sharp rebound from the global crisis.
"The slowdown in growth since mid-2010, even though smaller than earlier projected, has occurred despite a stronger-than-expected recovery in high-income economies and only gradual withdrawal of the monetary and fiscal stimulus across the region.
"We project real GDP growth will settle to a
