Download Economic losses from disasters

PAKISTAN | National Briefing
March, 2015
Target 3
Economic losses from disasters
This briefing note provides information relevant to the agreement of target (ii) of the draft Post-2015
Framework for Disaster Risk Reduction (DRR) for national monitoring , which reads: [Substantially] reduce direct
disaster economic loss [by a given percentage] in relation to GDP by 2030.
250
6%
1.16 percent of GDP
200
Billion USD
7%
Average Economic Loss
5%
150
4%
100
3%
2%
50
1%
0
0%
2002
2003
2004
2005
2006
Damage
2007
GDP
Context
Disasters damage the human and physical capital, leading to
short-term reduction of GDP in Pakistan, for example, prolonged
drought brought 50 percent reduction in GDP growth during
1998-2001 and floods in 2010 cost Pakistan 10$ billion (5.7
percen of GDP). While this is a negative impact in the short
term, the impact of disasters over the medium and long term is
difficult to establish due absence of reliable data
EM-DAT disaster data (2000-2013) and World Bank population
statistics for the same period, reveal that on an average, the
direct economic losses due disasters are 1.16 percent of
national GDP, tough the data is skewed due to heavy losses in
2005 earthquake and 2010 floods. Direct losses are not
reported for less intense disasters or disasters with slow onset
due to poor data collection infrastructure.
2010
2011
2012
2013
% of GDP
ECONOMIC LOSS: The term 'economic loss' encompasses
changes in wealth caused by damage to structures or other
physical assets. These can be direct (those resulting from
building and infrastructure damage) or indirect (those that
follow on from physical damage). These can be reflected in
market effects (e.g. loss of income owing to disaster-caused
destruction) as well as non-market effects (e.g. loss of
leisure time owing to longer commutes as a result of a
disaster).
In 2010 alone the monsoon rains caused massive floods which
killed nearly two thousand people, affected more than 20
million and made at least 7.8 million people food insecure and
inflicted over US$ 16 billion in economic loss.
Trends
2009
Measurement Note
In recent years, Pakistan has been hit by a series of natural
disasters. In October 2005, there was a 7.6 magnitude and
earthquake in 2010, 2011 and 2012 there was severe flooding.
These disasters had a massive cumulative effect on the
economy.
Agriculture accounts for 21 per cent of Pakistan's GDP, 45 per
cent of employment and 60 per cent of exports. This disaster
resulted in a loss of 7.5 million tons of sugarcane, 2.5 million
tons of rice, 0.7 million tons of cotton and 0.3 million tons of
maize.
2008
On an average 80 percent of the disasters are climate related.
The climate-only disaster losses are measured at 1 percent of
GDP for the period 2005-2013. Since 2010 flood, Pakistan is
consistently ranked among top 10 countries that have been most
affected by the impacts of weather-related loss events (storms,
floods, heat waves etc.).
Global Climate Risk Index (Avg loses per unit GDP)
6
5
4
3
2
1
0
90
80
70
60
50
40
30
20
10
0
Rank
2001
Percent lose
2000
2005
2006
2007
2008
2009
2010
Average per Unit GDP
2011
Rank
2012
2013
PAKISTAN | National Briefing
Among indirect losses, deaths occurred due to natural disasters
affect the GDP as they reduce the number of labor force
involved in production process.
Measuring disaster losses requires the normalisation of data for
key variables, like population or GDP, to allow the comparisons
between time periods and among subnational units.
Damage to houses and assets force households to divert their
resources from productive sectors to the reconstruction and
rehabilitation of their houses.
Keys Issues in setting up a baseline
Due to high level of poverty, after disasters, many children
are forced to drop out the school in order to compensate for
the income reduction by their participation in labor market.
Among business units SMEs are most vulnerable and take longer
to recover from disasters than larger businesses; a good majority
of SMEs do not survive high impact disasters.
Economic growth projections show that although real GDP is
likely to be impacted by a major disaster event, investments
in disaster risk reduction could significantly control this trend.
Recording and measuring economic losses
Key Challenges
Most often, accurate data on disaster losses is not available for
and the limited available data only refers to direct measurable
monetary losses (direct use values).
Methodologies for monetising indirect losses are crude and are
in early stage of sophistication.
The “Desinventar” database for Pakistan is supposed to have 16
standard indicators of direct damage proposed in the UNISDR
disaster loss collection methodology. However, the economic
damages information are not available in this dataset.
Documenting disaster statistics are essential for DRR policy
making, recovery and rehabilitation as these are fully dependent
on understanding of risk profiles and severity of the disaster
impact.
There are limitations on disaster data that have been pooled so
far by national and subnational agencies. Information on disaster
occurrence and impact is often collected by different national
and international agencies for relief fundraising rather than
statistical purposes. The lack of standardized methods and
definitions diminishes the ability to set an accurate baseline for
monitoring disaster impact and losses.
The lack of damage reporting leads to underestimation of the
true economic costs arising from disasters, especially for remote
areas.
The lack of standard methods to measure impact on economy or
humankind seriously compromises comparison across time and
space. Progress in disaster risk reduction becomes difficult to
measure in the absence of national and subnational
benchmarks.
Implications for monitor reporting in the post-2015
framework for DRR
The NDMA has regularly reported that the disaster data is
incomplete, scattered across various organizations, most often
inaccessible, and sometimes suffers from lack of reliability.
The proposed target of reducing economic losses from all
disasters by 20% (per unit of GDP) by 2030 will require Pakistan
to limit its economic losses at 0.93 percent (per unit GDP). This is
a very ambitious target considering Pakistan’s vulnerability and
risk level. It is estimated that climate change only could cost the
economy $14 billion a year due to natural disasters and other
losses, which is almost 5% of the GDP.
Disaster damage and loss information are not systematically
brought together to monitor hazard patterns, occurrence,
vulnerability, magnitude and severity. These gaps limit the
possibility of assessing relative impact of disaster hazards as well
as any meaningful forecasting.
Trends in the economic losses are highly influenced by single
extreme disaster events. A roboust DRR statistics system
must accurately monitor direct losses for disasters with
various magnitudes and slow onset like drought as well as
indirect losses.
The accumulated losses do not cover small-scale, highly frequent Different provinces/regions present different disaster profiles
and localised disasters and the available statistics are solely and national databases should reflect these variations to
accurately monitor disaster economic impact.
based on major disasters.
Sources
§ Asian Development Bank and World Bank (2010). Pakistan 2010 Floods: Preliminary Damage and Needs Assessment.
http://gfdrr.org/gfdrr/sites/gfdrr.org/files/publication/Pakistan_DNA.pdf
§ DesInventar Disaster Information Management System. Available at http://www.desinventar.net/index_www.html
§ EM-DAT. The International Disaster Database. Centre for Research on the Epidemiology of Disasters (CRED). Available at
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§
§
§
2
http://www.emdat.be/
Global Climate Risk Index Reports (2006-2015) Available at http://germanwatch.org/en/cri.
Guha-Sapir, D., I. Santos and M.E. Alexandre Borde. (2013). The Economic Impacts of Natural Disasters: Oxford University Press, USA.
Klieson, K.L. (1994) 'The Economics of Natural Disasters', http://bit.ly/18hkWdM
The Express Tribune. March 22, 2012. http://tribune.com.pk/story/353606/climate-change-at-its-current-trend-could-cost-pakistan-14billion-a-year/
1995-2015
Years of
Leadership
Leadership for Environment & Development (LEAD) Pakistan
Written by: Nadeem Ahmad, Public Policy Analyst
LEAD House, F-7 Markaz, Islamabad. Pakistan.
Tel: +92 (51) 2651511, Fax: +92 (51) 2651512
Email: [email protected]
Web: www.lead.org.pk
Reviewed by: Hasan Akhtar Rizvi, Khizer Farooq Omer