Thu, Oct 11, 2001 page18

• Attacks costing US over US$100bn and counting

  • AFP
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  The terrorist onslaught on the US wreaked more than US$100 billion in damage and the costs are still piling up a month later, experts said.

  More than 100,000 jobs have been lost, with some economists predicting a final figure of 500,000. The entire US economy is hurtling towards recession. Global growth forecasts are being cut.

  "The impact will be worse than any of the events of the last 40 years including the oil shock of the 1970s," Consumer Board economist Ken Goldstein said.

  In New York, a preliminary report by City Comptroller Alan Hevesi said total costs could rise to US$105 billion -- more than a year's total economic output by Singapore. Then there is the staggering impact that has rippled through the aviation, tourism and related industries.

  Congress passed US$5 billion in cash aid to compensate airlines for the direct cost of the disaster.

  The International Air Transport Association (IATA) said it expected another US$7 billion in costs for airlines elsewhere in the world.

  Workers have also taken a massive hit. The six top US airlines alone announced 85,000 layoffs because of the attacks. Boeing cut another 20,000-30,000 workers.

  The full impact has yet to be felt in jobs, although most economists expect the US unemployment rate to rise to six percent from the current four-year record 4.9 percent.

  "It will be a couple of months before we know," said Goldstein.

  "But it will be crystal clear that the initial number will be in the order of half-a-million people who can be attributed directly or indirectly to Sept. 11."

  The most devastating blow is invisible: fear. An index of US consumer confidence by the University of Michigan crashed to 81.8 points in September from 91.5 in August. Responses came both before and after the terrorist onslaught.

  The US-led bombardment of targets in Afghanistan may now heighten concerns about terrorist retaliation, experts say. That threatens consumer spending, which accounts for two-thirds of US economic activity.

  "Clearly this [US-led response] and fears of retaliation will weigh heavier on confidence both in the business and the consumer sector," said Bank One chief economist Diane Swonk.

  "This is a very fragile situation that can easily be set back. The real issue now is whether or not there will be another act of terrorism that literally scares consumers back into their homes."

  Wall Street's Dow Jones industrials index slumped more than 14 percent in the first week after the dust-caked exchange building reopened. It is now just over five percent down since Sept. 11.

  Liquidity pumped into market

  Liquidity pumped in by the US Federal Reserve had helped the market, said Eaton Vance economist Robert McIntosh.

  "We have probably come close if not already had a bottom. The only thing that could send us to new lows would be another wave of terrorism. That is certainly a concern," he added.

  McIntosh, like most other analysts, said he expected the US economy to shrink in the third and fourth quarters of this year before recovering in 2002.

  Even before accounting for the terrorist attacks, the IMF last month cut its forecast for world growth this year to 2.6 percent from 3.1 percent.

  The terrorist attacks were likely to have a moderate impact on the forecast for 2001, it said. It would also lead to a cut in the 2002 forecast for growth of 3.5 percent.

  Some of the direct costs already estimated by the Pentagon, New York authorities and private experts included:

  Repairs to the Pentagon building will cost between US$700 to US$800 million. Cost of rebuilding, repairs, stabilization and clean-up of the World Trade Center surrounding buildings and infrastructure: US$30 billion.

  Destroyed equipment such as cars and computers were estimated at US$12 billion.

  Lost wages using an estimate of 5,600 people: US$11 billion. City government overtime, vehicle losses, road building etc: US$7 billion. Lost business and economic activity: US$21 billion. Other costs: US$8.75 billion.

  The four Boeing planes destroyed in the attack are estimated to have cost US$390 million.
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