Quake to cost Haiti economy at least 15 pct of GDP

The devastating earthquake in Haiti will cost the nation’s economy at least 15 percent of its gross domestic product, or GDP, said Pamela Cox, the World Bank’s vice president for Latin America and the Caribbean.

The Jan. 12 quake is a “much bigger tragedy” than the four tropical storms or hurricanes that struck the nation in 2008, Cox said in an interview over the weekend with Bloomberg Television. Reconstruction efforts will take years and require help from the private sector, she said.

Since the 7-magnitude earthquake, governments from the U.S. to France, companies such as Bank of America and the World Bank have pledged hundreds of millions of dollars in aid and sent hundreds of rescue workers and equipment. Haiti’s prime minister estimated that more than 100,000 people may have died.

“We are looking at a minimum of 15 percent of GDP,” Cox said, basing her estimate on the toll the four storms took on the economy in 2008.

Haiti, the poorest country in the Western Hemisphere, had an economy of $6.9 billion in 2008, according to the Central Intelligence Agency’s Web site. Service accounts for about 52 percent of the gross domestic product in Haiti, located on an island with the Dominican Republic. The rest is made up of agriculture and industry.

Difficulty in aid distribution:

The World Bank’s 15 percent figure is too conservative, Eduardo Gamarra, a political science professor at Florida International University in Miami, said in a telephone interview. Aid and pledges to Haiti will be difficult to distribute, said Gamarra, who specializes in Haiti and the Dominican Republic.

“The international community has had a marvelous way of promising things to Haiti but then being incapable of delivering it,” Gamarra said. The government “is incapable of absorbing the necessary aid money because Haiti has no institutions.”

Economic damage in Haiti may be in the “low-single-digit billions” of dollars, said Eqecat, the company that builds financial risk models to help insurers prepare for catastrophes.

Bank of America, the largest U.S. Bank, pledged $1 million in aid. Digicel Group, the largest mobile phone provider in Haiti, said it would donate $5 million for relief services. Other announced donors included JPMorgan Chase, American Express, Visa, Amgen, United Parcel Service, Lowe’s Cos., Wells Fargo, Eli Lilly and Co., Walt Disney, Western Union, France’s Credit Agricole and Britain’s Tesco.

U.S. President Barack Obama said the U.S. would respond with “every element of our national capacity,” including $100 million in relief spending.

Obama has asked former presidents Bill Clinton and George W. Bush to lead the U.S. efforts to aid Haiti. Clinton is also the UN’s special envoy to Haiti.

The International Monetary Fund has set aside $100 million for Haiti, Managing Director Dominique Strauss-Kahn said. “The IMF stands ready to do its part,” he told reporters.

The World Bank and IMF had granted Haiti $1.2 billion in debt relief for improvements in the government’s economic and financial management last year. In May 2009, the IMF estimated Haiti’s economy would grow 2 percent and inflation would rise 5 percent.