Italy’s earthquake: estimating the economic and financial damage

The human cost of the earthquake which hit Italy on 24 August was disastrous, with nearly 300 people killed and almost 400 injured. But the earthquake will also have both a short and long-term economic impact on the country. Lorenzo Codogno attempts to estimate the size of this impact, noting that the nature of the economic damage, the lack of major disruptions to transportation, distribution and energy production facilities should ensure there will only be a limited impact on Italy’s GDP. He states that 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, it may be expected to have a neutral or marginally negative effect, though the insurance nature of some of the extra spending may tilt the balance toward a positive impact.