Japanese economy to grow just 0.8% in 2011

Japanese economy will see a significant slowdown this year, clocking a growth of just 0.8 per cent in the wake of last month's devastating earthquake and tsunami, according to OECD.

The Paris-based Organisation for Economic Cooperation and Development (OECD) on Thursday, however, said that economic activities in Japan were expected to get a boost in 2012 due to extensive reconstruction works.

"The experience of past disasters in Japan and other developed countries suggests that the negative short-term impact on economic output will be followed by a rebound as reconstruction spending picks up.

"Such a pattern is projected to slow real GDP growth to 0.8 per cent in 2011, followed by a pick-up to 2.3 per cent growth in 2012," OECD, a grouping of developed and  developing nations, said.

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In 2010, the world's third largest economy grew about 3.9 per cent.

The disaster is estimated to have caused damages to the tune of 16 to yen 25 trillion and reconstruction spending is expected to be about 1.1 per cent of the national GDP through the end of 2012.

The natural calamity on March 11 caused huge damages to properties as well as lives, and is estimated to have resulted in hundreds of billions of dollars worth losses.

As per the grouping, there is "great uncertainty about developments in Japan, including the duration of electricity shortages, the problems at the Fukushima nuclear plant and the size and timetable of government reconstruction spending".

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Noting that the immediate fallout of the natural calamity is likely to be large, OECD said damage to factories in the Tohoku region has disrupted supply chains of key industrial products beyond Japan, especially in the automobile sector.

"An extended downturn is thus unlikely. On the external side, there have been signs of a pick-up in trade in the Asian region, which accounts for 56 per cent of Japanese exports," the grouping said.