Tropical cyclones cut the economic activities in the country by an average of 2 percent annually, according to the Asian Development Bank (ADB).
In a forthcoming study cited in the Asian Development Outlook (ADO), after the most severe storm in the sample, local economic activity in the country was even reduced by 23 percent.
This is something that ADB Economic Research and Regional Cooperation Department Senior Economist Benno Ferrarini said could turn into a “GDP (gross domestic product) tragedy” and should be prevented.
“Economic damage and, more tragically, loss of life, impair economic activity and slow its expansion. The destruction of human and physical capital results not only in foregone production, but spillovers and knock-on effects can ripple across the entire economy,” Ferrarini said in an Asian Development Blog published on Monday.
In the special chapter in the ADO, the ADB said frequent storms with a five-year return period are expected to produce losses equal to 1 percent of national economic activity.
However, this increases when storms that are more infrequent hit the country. An example is a storm with a 50-year return period, which is expected to reduce national economic activity of over 2 percent.
The ADB also said in the special chapter that the impact on economic activity also varies substantially between and among regions.
In Region 8, or Eastern Visayas, ADB said typhoons with 50-year return periods caused losses in economic activity exceeding 20 percent. But in regions like the National Capital Region, the impact was lower at only 1-percent reduction in economic activity.
Differences in the region was also observed. Ferrarini said between 2000 to 2018, disasters cost the region $644 billion in total damages to physical assets.
But in relative terms, impacts are felt most strongly in the Pacific, where more than 10 percent of population and 6 percent of assets are affected by disasters each year on average.
“More often, though, disasters are localized events with impacts concentrated in the affected area. However intense locally, impacts tend to be diluted when averaged out over a large unit of analysis, such as national GDP,” Ferrarini said.
Ferrarini emphasized the importance of international support mechanisms that can be activated quickly enough to limit a disaster’s economic impact.
Recent examples include ADB’s disbursement of disaster contingent financing to Tonga just three days after the country was struck by Typhoon Gita in February last year.
This also includes ADB’s Pacific Catastrophe Risk Insurance Company, a risk-pooling consortium making parametric insurance accessible to these countries.