Understanding the Economic and Financial Impacts of Natural Disasters

This report explores the macro-economic and public finance implications of natural disasters, including the role of information and mechanisms for risk spreading, and drawing in particular on evidence from Bangladesh, Dominica, and Malawi. Major natural disasters can have severe negative short-run economic and budgetary impacts. Disasters also appear to have adverse longer-term consequences for economic growth, development, and poverty reduction. However, negative impacts are not inevitable: sensitivity to natural hazards is determined by a complex, dynamic set of influences. Vulnerability can shift rapidly, especially in countries experiencing economic transformation - rapid growth, urbanization, and related technical and social changes. The report concludes that in order to stem the rising cost of natural disasters globally, hazard risk management concerns need to be integrated into longer-term national investment policies and development strategies and appropriately reflected in the allocation of financial resources, including medium-term financial planning. The generation and dissemination of quality, reliable scientific information should be supported as part of this process. In addition, assessment of the economic and financial impacts of disasters should be extended to include a full reassessment 18 to 24 months after an event, generating vital information on the nature of impacts and underlying causal factors.

Reserach Authors
Benson, Charlotte
Clay, Edward