L. Codogno – Italy’s Earthquake: Estimating the economic and financial damage
With nearly 300 dead and almost 400 injured, the human cost of the earthquake that hit Italy on 24 August is immeasurable. However, the earthquake will also have both a short- and long-term economic impact on the country.
Estimating the size of this impact is not an easy endeavor. Given the nature of the economic damage and the lack of major disruptions to transportation, distribution, and energy production facilities, there should only be a limited impact on Italy’s GDP. Public spending on reconstruction may more than offset the negative impact of the quake over the near term.
Long-term, taking into account fiscal multipliers and the mostly non-productive nature of re-building activity, a neutral or marginally negative effect may be expected, though the insurance nature of some of the extra spending may tilt the balance toward a positive impact. However, if reconstruction is done intelligently, it may represent an opportunity.