WASHINGTON, Oct 7: Hurricanes Katrina and Rita caused between $70 billion and $130 billion in property damage and will have a sharp if short-lived impact on the overall economy, the US Congressional Budget Office said on Thursday.

The CBO said the insured and uninsured damage to homes, business and other property will likely be less than the high of $140 billion estimated by the economic firm Risk Management Solutions but would still be the costliest natural disaster in recent US history.

The overall economic impact of the storm, however, is likely to be felt only for a few months before recovery in the fourth quarter of this year, CBO director Douglas Holtz-Eakin told the House of Representatives Budget Committee.

Holtz-Eakin said the two storms probably wiped out between 293,000 and 480,000 jobs in the region and that total economic output may be cut by one to 1.5 percentage points in the third quarter. But he said recovery would likely be swift.

“As cleanup and repair begin, the economy in the fourth quarter is likely to grow at a rate not much different from what it would have been without the hurricanes and possibly even a little higher,” he said in his prepared remarks.

“Real GDP growth for the two quarters together — that is, for the second half of 2005 as a whole — is likely to be dampened by about half a percentage point. By the first quarter of 2006, though, spending to repair or replace the capital stock (homes, business structures, and equipment) is likely to drive the level of output back roughly to its previous trend and to continue to add slightly to growth during the rest of that year.”

A similar story is likely in the employment picture, he said.

“By early next year, the pace of reconstruction will probably cause the net effect of the hurricanes on jobs nationwide to be minimal,” he stated.

“If, as appears likely, output bounces back by early next year to equal or exceed its previous trend, total employment will be similar to what it would have been if the hurricanes had not occurred, even though some of the people who lost jobs may remain unemployed for some time.”

Inflation will also pick up by as much as one percentage point in the second half of this year as a result of the storms, primarily because of the increase in energy prices, the CBO said.—AFP