IMF: NZ Quakes More Costly Than Japanese Disasters

By: EW News Desk Team   Date: 10 May 2011

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EW News Desk Team

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EconomyWatch, News Desk Team

 

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10 May 2011

Ever since the earthquake and tsunami in March, Japan has received an endless stream of sympathy and donations from all around the world. Social media and the Internet, in particular have been praised for garnering support and aid for Japan.

However, with the world and the media’s collective sympathy being fixed on the Japanese recovery, few have remembered that a similar disaster occurred in Christchurch, New Zealand barely a month before the Japanese disaster.

The 2011 Christchurch earthquake was a 6.3-magnitude earthquake that struck the Canterbury region in New Zealand on 22 February 2011. This had come after a 7.1-magnitude earthquake had hit the exact same region nearly six months before. In total, 181 people were killed during the earthquake. New Zealand Prime Minister John Key described the earthquake as “New Zealand’s darkest day” and declared a state of emergency that was only lifted on 30 April 2011.

According to an IMF report, the earthquakes in New Zealand are likely to hurt its economy far more than the recent disasters in Japan will affect Tokyo's economy.

The IMF estimates that the recovery effort in New Zealand will cost about US$12 billion, or about 7.5 percent of its GDP.

"While the scale of damage from the recent Japan earthquake is still uncertain, it is likely to be less than the Canterbury earthquakes as a percent of GDP.”

IMF economists also added that the earthquakes are likely to wipe off two percentages points from New Zealand’s economic growth this year, primarily due to damage to New Zealand’s economic infrastructure as well as weakened economic confidence within the country.

"Large uncertainty surrounds the economic outlook, particularly related to the size and timing of reconstruction from the earthquakes."

The New Zealand government is also set to post its worst-ever cash deficit. Finance Minister Bill English warns that the government’s operating deficit is expected to double from NZ$9.0 billion in 2009/2010 to NZ$17.0 billion in 2010/2011.

“It’s essential that the Government gets its own finances in order as quickly as possible, so it can join households and businesses in lifting national savings and reducing New Zealand’s vulnerability to foreign lenders,” English said in a statement. “The Budget next week will confirm a very large deficit for the current year, including the immediate costs of rebuilding Christchurch.”

Read the full story from AFP

Learn how to contribute to the New Zealand earthquake relief effort by visiting the New Zealand Red Cross.  


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