Poor countries, they argue, suffer more in the medium and long run as a result of natural disasters, given that reconstruction and recovery efforts are not as effective. In addition, a survey of the literature by Cavallo and Noy (2010) concludes that the medium and long run economic impact of a disaster is influenced by a country’s “ability to mobilize significant funding for reconstruction”. The economic impact of severe disasters is more pronounced, with severe storms/cyclones negatively impacting future GDP, as well as future output in the agricultural, industrial and service sectors. That result differs when severe disasters – such as Cyclone Pam – are considered. Economic output in the industrial sector, for example, is found to be positively affected by floods, earthquakes, and storms (including cyclones), but not droughts – presumably due to the reconstruction activities that follow such disasters.* In some cases, disasters are found to have positive economic impacts. They find that a ‘typical’ (median) natural disaster has a negative impact on future economic growth over the medium run, but that the effect differs according to the type of disaster and the sector being discussed. (2009) control for a range of factors that also affect growth (education, institutions, trade openness etc.) when assessing the economic impact of various disasters on the economy as a whole, as well as three economic sectors: agriculture, industry and services. One of the most rigorous efforts to ascertain the lasting economic impact of disasters was commissioned by the World Bank in 2009. It is no wonder that cross-country studies are so problematic. Disasters impact the various economic sectors (such as agriculture and services) differently, and often affect specific geographical areas, not the entire country (Cyclone Pam was unique given the breadth of its impact, but even in this case some islands such as Santo were not severely affected). Vanuatu, in addition to being at risk of cyclones, is also affected by earthquakes, tsunamis, and volcanic eruptions – each of which has different economic impacts. Such empirical work is made difficult by the fact that disasters come in many forms. Cross-country econometric studies have – perhaps unsurprisingly – reached mixed and often conflicting conclusions. There is a substantial body of empirical literature on the lasting economic impact of disasters. The impact of Cyclone Pam on future economic output is less clear. We can expect similar, and probably more significant, damage to have resulted from Cyclone Pam. To illustrate, Cyclone Evan in 2012 was estimated to have caused damage equal to approximately 30 percent of Samoa’s Gross Domestic Product (GDP). It is clear that such damage will be significant. caused by Cyclone Pam will probably be available by the end of the month. Estimates of the damage to infrastructure, housing etc. The World Bank and UNDP have been tasked with preparing a Post Disaster Needs Assessment by the Vanuatu Government, and will report back to government by 23 April, ahead of a donors’ conference.ĭespite the current lack of data, experience with disasters in the Pacific and other parts of the world can provide us with some guidance on what to expect. The first comprehensive damage assessments will not be finalised for another few weeks. There is also limited data on which to base any analysis. For those in Vanuatu, such analysis is no doubt too soon – the focus has to date been on the immediate response. What is likely to be the economic impact of Cyclone Pam in the medium run (the next three to five years)? There has been little written about the economic impact of Cyclone Pam to date. Indeed, reconstruction and recovery activities are already underway. Gradually, however, emergency response efforts will be replaced by reconstruction and recovery efforts, aimed at re-building Vanuatu’s infrastructure, housing stock, and agricultural and tourism enterprises. Food security, shelter, immunisation and access to clean water have to date, quite rightly, been the focus of the Vanuatu Government and humanitarian partners. Most households have been affected, with the Office of the Prime Minister claiming that up to 70 percent of Vanuatu’s 277,000 population may have been displaced.
The emergency response in Vanuatu will continue for some months, such was the breadth and intensity of Cyclone Pam.
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