2.2.4 Tropical cyclone and flood economic loss risk is increasing

In contrast to mortality risk, estimated economic loss risk associated with floods and tropical cyclones is increasing in all regions. As with mortality risk, as countries develop they strengthen their risk governance capacities and reduce their vulnerabilities. However, these improvements have failed to offset the very rapid increase in exposure fuelled by rapid economic growth. Increases in such capacities do not immediately reduce the vulnerability of existing fixed assets, such as buildings and infrastructure, which are often used beyond their expected lifespan. Similarly, as will be further explored in Chapter 6, instruments such as land use planning and building regulation have struggled to reduce vulnerability, particularly in rapidly urbanizing areas.

In the case of floods, economic loss risk is increasing faster in OECD and high-income countries than in other geographic and income regions, even though exposure in these countries is increasing at a far slower rate than elsewhere, for example Latin America and the Caribbean (Figure 2.16). As the 2011 floods in Germany and Australia illustrate, even highincome countries struggle to manage increasing exposure. Although GDP exposure to floods (Table 2.4) is increasing faster than GDP per capita in all regions, the risk of economic damage is only growing faster than GDP per capita in high-income countries.

Region	1970-1979	1980-1989	1990-1999	2000-2009
East Asia and the Pacific (EAP)	2.8	5.1	10.2	21.5
Europe and Central Asia (ECA)	2.2	2.7	2.7	3.1
Latin America and the Caribbean (LAC)	2.5	3.2	3.9	5.4
Middle East and North Africa (MENA)	0.3	0.4	0.6	0.9
OECD countries (OECD)	24.1	32.8	43.5	52.9
South Asia (SAS)	3.9	5.4	8.7	15.4
Sub-Saharan Africa (SSA)	0.4	0.5	0.6	0.9
World	36.2	50.0	70.2	100.1

Region	1970-1979	1980-1989	1990-1999	2000-2009
East Asia and the Pacific (EAP)	16.0	25.3	39.5	90.2
Latin America and the Caribbean (LAC)	2.3	4.9	3.7	24.3
Middle East and North Africa (MENA)	0.0	0.0	0.0	1.0
OECD countries (OECD)	506.6	665.1	1,247.1	1,455.0
South Asia (SAS)	0.3	2.6	4.2	4.3
Sub-Saharan Africa (SSA)	0.5	1.1	1.3	1.7
World	525.7	699.0	1,295.8	1,576.5

The proportion of the world’s GDP exposed to tropical cyclones increased from 3.6 percent in the 1970s to 4.3 percent in the first decade of the 2000s. During that time, the absolute value of global GDP exposed to tropical cyclones tripled, from US$525.7 billion to US$1.6 trillion (Table 2.5).¹²  GDP exposure increased rapidly in the OECD in the 1990s, and in East Asia and the Pacific and in Latin America and the Caribbean in 2000–2009. In East Asia and the Pacific in 2009, the GDP exposed was nearly six times greater than in 1970. In contrast, although most of the exposed global GDP is concentrated in OECD countries, it was only three times greater in 2009 than it was in 1970.

Economic loss risk for cyclones is increasing in all regions. It has almost quadrupled (increasing by 265 percent) since 1980 in the OECD, almost tripled in sub-Saharan Africa (181 percent), and is more than two-and-a-half times greater in other regions (over 150 percent higher). In East Asia and the Pacific, and South Asia, risk is increasing because reductions in vulnerability are not offsetting rapidly increasing exposure (Figure 2.17). In terms of income regions economic loss risk has almost quadrupled (increasing by 262 percent) in high-income countries, and is more than two-and-a-half times greater in upper-middle-income countries (165 percent), lower-middle-income countries (152 percent) and low-income countries (155 percent). Thus economic strength has failed to reduce economic loss risk, even in the OECD.



GDP per capita has grown by more than eight times (703 percent) in East Asia and the Pacific and has almost quadrupled (increasing by 293 percent) in South Asia, outpacing the growth in exposure in both regions. As such, estimated risk has fallen relative to GDP per capita. In all other regions, however, both exposure and the estimated risk of economic loss are growing faster than GDP per capita. Thus the risk of losing wealth in disasters associated with tropical cyclones is increasing faster than wealth itself is increasing.

2.2.5 Countries that are falling behind in their development achievements have less resilience to disaster loss

Disaster losses must be put into perspective. Economic losses due to floods in South Asia are in absolute terms far smaller than those in the OECD. Relative to the size of South Asia’s GDP, however, flood losses there are approximately 15 times greater than losses in the OECD. Thus, although economic loss risk in the OECD may be increasing faster, such losses threaten OECD countries’ economies far less than they do those of most low- and middle-income countries.

Low-income countries have less capacity to absorb and recover from flood-inflicted economic losses. Similarly, larger economies are more able to absorb losses than smaller ones (including many Small Island Developing States). Larger economies tend to be more diverse geographically and economically, and are thus better able to compensate for losses in any one region or sector (Corrales, 2010). Furthermore, they can better absorb migration and are more likely to be able to counter the longer-term economic effects of severe loss of productive assets, interrupted supply chains or distorted markets after a disaster. The ability to withstand losses is not solely dependent on a country’s share in world trade or on trade volumes, but also on the diversity of its products and trade partners. Limitations in both make a country more vulnerable to disaster-induced trade shocks and disruptions.

As Figure 2.18 shows, over the last 30 years, the gap in development achievements between many lower-income countries and the OECD has grown and is likely to widen further as a result of climate change.¹⁴  Although GDP per capita, human development, capital formation and competitiveness of some low- and middle-income countries has approached those of the OECD, others have fallen further behind both their low- and middle-income counterparts and the OECD. Some of these divergent economies may be experiencing ‘resilience traps’, where disaster losses and impacts cause negative feedback into slow development and structural poverty. Climate change may further test the resilience of many of these countries.



Notes