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IHS Analysis - “Global Economic Impact of the Japanese Earthquake, Tsunami, and Nuclear Disaster”

IHS Global Insights (parent company of Cambridge Energy Research Associates) provided an analysis of the economic impact the earthquake will have on Japan, the world economy, the US, Europe and the rest of Asia. Below are some pulled nuggets:

The near-term impact on Japanese growth is likely to be negative and potentially quite large. However, by the end of this year, the reconstruction effort is likely to get under way and provide a substantial boost to growth.

The big uncertainty about this disaster (and what sets it apart from other such disasters) is that roughly 10% of electricity generation capacity (both nuclear and coal) may be offline for a few months, until oil- and gas-fired plants can ramp up. In the near term, this could have major negative ramifications for Japanese industrial sectors; some steel and automotive factories have already been closed.

Based on very crude and preliminary estimates, IHS Global Insight estimates that Japanese real GDP growth could be cut by 0.2–0.5 percentage point this year and boosted by 0.5–1.0 percentage point next year.

Rough estimates suggest that the negative impact on global growth this year will be negligible—at most in the 0.1–0.2% range, with a correspondingly small boost to growth next year.

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