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Most southern states not seen hard hit by Katrina

August 30, 2005

By Michael Connor

MIAMI (Reuters) – Economic fallout in the southern United
States from Hurricane Katrina should be minor outside of
Louisiana, Mississippi and Alabama, relatively poor and slowly
growing states facing many months of post-storm recovery.

The states on the Gulf of Mexico, which were hardest hit by
Katrina, account for only 3.1 percent of America’s $12 trillion
a year of gross domestic product, according to Wachovia Corp.
senior economist Mark Vitner in Charlotte, North Carolina.

“When you look at the South, it is a pretty vast area. The
fastest growing areas, such as Atlanta, North Carolina and most
of Florida, were not affected by the storm,” he said. “We are
not going to see a devastating effect on the region.”

However, Vitner and other analysts said lost production at
gulf oil facilities and shipping logjams at New Orleans created
by Katrina could have wider economic consequences, if they
endure and lead to higher prices.

“The only ways Katrina will affect the overall economy is
through the oil channel or through the shipping channel,” said
Rajeev Dhawan, director of the economic forecasting center at
Georgia State University in Atlanta.

On Tuesday, the vital Louisiana Offshore Oil Port was
reported by one of its officials to have weathered Katrina
without major damage and may be able to resume oil deliveries
by Thursday.

Some economists have said U.S. GDP growth could be slowed,
perhaps dramatically, if energy prices remain high and do not
merely spike.

The storm could be the costliest ever, according to damage
estimates.

Standard & Poor’s Ratings Services on Tuesday said business
disruptions and property damages from Katrina would likely hurt
U.S. third-quarter GDP but repair work would boost national
output in subsequent quarters.

Credit ratings agencies said Katrina, which may have killed
hundreds and caused severe flooding in New Orleans, will
require clean-up and repairs that will dull the tourism,
gambling and energy sectors of Louisiana and Mississippi.

Hotels, restaurants and other leisure businesses are big
employers, and have already lost several days of business and
face not only physical repairs but must counter threatening
news media images and reports.

Gambling alone at a dozen casinos in Biloxi and elsewhere
along Mississippi’s gulf coast throw off about $500,000 daily
in taxes for the state government, according to analysts.

A spokesman for Biloxi, a city of about 50,000 badly
damaged by Katrina, said casino taxes accounted for about $20
million a year, or a third of the city’s budget. About $10
million of the taxes were insured against losses, he said.

S&P said the debt ratings of a number of municipal bond
issuers — including the states of Louisiana and Mississippi
and the City of New Orleans — may be lowered as a result of
the hurricane damage.

Issuers that may be affected by a rating downgrade have
exposure to tourism, gaming and offshore oil and gas
extraction, S&P credit analyst Alexander Fraser said. “Those
are the ones that may have some immediate near-term revenue
disruptions, maybe of the type that may not be replaced.”

The issuers put on the negative watch by S&P included New
Orleans, with $530 million of outstanding debt; Louisiana, with
$3.5 billion in debt; Mississippi, with $3.1 billion in debt;
and Biloxi, with $61 million in debt, according to Fraser.

Another Wall Street credit ratings agency, Fitch Ratings,
said on Tuesday it had no plans to change any ratings on
municipal bond issuers in the region but was monitoring the
tourism, gambling and energy sectors as they affect government
finances.

“Generally speaking, natural disasters don’t result in
downgrades,” said Fitch managing director Amy Laskey. “The
impacts tend to be shorter term, and there will be some
short-term disruptions. That dislocation tends to be followed
by significant rebuilding.”




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