UN report: Disasters threaten Phl economic growth

MANILA, Philippines - Disasters seriously threaten the growth prospects of vulnerable countries like the Philippines and can result in huge losses and heavier debt burdens, a report by the United Nations said.

The Global Assessment Report on Disaster Risk Reduction 2013 (GAR) released this month said countries that have experienced intensive disasters may never recover lost growth in the medium or long term.

The report said countries affected by tropical cyclones experience lower gross domestic product – or the sum of all goods and services produced by the economy in a given period and is an indicator of the size of an economy – growth in the 15 years that follow compared with the estimated growth that would have occurred without cyclone impacts.

“In countries with frequent severe cyclones – such as Madagascar and the Philippines – and large fiscal gaps, growth will be lower over several decades,” the report noted.

Jerry Velasquez, senior regional coordinator for Asia Pacific of the UN Office for Disaster Risk Reduction, said the Philippines’ 7.8 percent growth in the first quarter could have been higher if losses from recent disasters were reduced.

“The opportunity for the Philippines is to make its economic growth more resilient and thus also reduce poverty as the poor are the worst hit by disasters,” Velasquez said.

“Many people may not know this but the real cost of disasters like (Tropical Storm) Ondoy were borne by regular people: teachers, farmers, office workers,” he added.

In the GAR, the UN warned that middle-income countries like the Philippines and Puerto Rico could lose more than 15 percent of their exposed capital stock to winds from a catastrophic tropical cyclone that comes every 250 years.

“Some middle-income countries, such as Philippines, have high levels of risk because their exposed produced capital is more vulnerable than in high-income countries due to weaker building structure and material,” the report read.

“The impact that this has on expected annual average loss highlights the risks of making business investments in countries with higher levels of vulnerability an important consideration for investors,” it added.

The UN has also estimated that the Philippines may lose as much as 19 percent of its total urban produced capital in an earthquake that comes every 250 years.

The country may suffer fiscal losses of more than $9 billion if it gets hit by a tremor and such loss is equivalent to about 27 percent of the Philippines’ state revenues.

“The Philippines displays an equally significant fiscal vulnerability to wind damage, highlighting how losses can easily exceed government revenue, potentially resulting in an increased debt burden,” the report warned.

The UN noted that a country’s fiscal capability determines if it can provide timely relief to victims, invest in the reconstruction and avoid long-term economic impacts.

“The Philippines also has consistently experienced financing gaps owing to disasters since 2000,” the GAR reads.

The country posted a deficit of more than P100 billion in 2000 and more than P300 billion in 2009 as it needed to borrow and use cash balances to address the effects of disasters.

“Although the Philippines has financed part of those gaps by domestic and foreign credit, in many countries, sovereign risks are likely to limit borrowing capacity,” the report noted.

The GAR is an initiative that seeks to monitor risk patterns, trends and progress in disaster risk reduction while providing policy guidance to countries and the international community.

UN Secretary-General Ban Ki-moon warned during the launching of the report that disaster risk is increasing every day, aggravated by poverty, rapid urbanization and climate change.

“Economic losses from disasters are out of control. They can only be reduced in partnership with the private sector, including investment banks and insurance companies,” Ban said.

“Reducing exposure to disaster risk is not a cost, but an opportunity to make that investment more attractive in the long term,” the UN chief added.

Ban also noted that the level of disaster risks is related to investments by the private sector.

“In the years ahead, trillions of dollars will be invested in hazard-exposed regions. If that money fails to account for natural hazards and vulnerabilities, risk will increase. Where such spending does address underlying risk factors, risk will go down,” he said.