As relief workers come to terms with the wreckage left by the Japanese earthquake, fund managers believe there is some cause
for optimism: the prospect of a speedy economic recovery. History suggests that after an initial hit to growth reflecting the loss of life and crippled productivity wrought by the disaster, the economy could bounce back.
According to Guy Bruten, global economist at AllianceBernstein, this will occur if the disaster follows “typical” historical patterns. In this scenario, “the cleanup process, monetary easing and reconstruction activity ends up boosting the overall GDP over a number of quarters”, he said.
Sam Perry, senior investment manager at Pictet Japanese Equity Selection Fund, is also optimistic. “The earthquake could be positive to total GDP,” he said. “The fiscal effect of rebuilding is very stimulatory.”
The example of the Great Hanshin earthquake that hit Kobe city in 1995 is instructive. As reconstruction got under way, GDP picked up in the second half of the year despite an increase in the yen and a slowdown in the US economy. However, onlookers are watching cautiously in case the recovery is scuppered by complications at Japan’s flooded nuclear reactors.
©2011 funds europe
