How do economies bounce back after a disaster?

3 May 2017

Catherine Simonet, Development Economics Researcher at ODI, Overseas Development Institute

Disasters such as floods, earthquakes and droughts, have a negative impact on a country’s economic growth, which in turn impacts the poorest and exasperates their vulnerabilities to shocks. A new paper by the Overseas Development Institute, Disasters and national economic resilience, finds that there is also a time dimension to how the impact of disasters plays out.

Groups of developing countries – including 12 countries across the Sahel, East Africa and Asia that are covered by the Building Resilience to Climate Extremes and Disasters (BRACED) programme and are disproportionately affected by climate-related disasters such as droughts and floods – were analysed over a 42-year period.

Authors found that the countries tended to experience a short-term recovery one year after a disaster. This can be explained by the sharp increase in international aid immediately following a disaster or through insurance policies kicking in.

Typically though, countries then face an economic slowdown three years following the disaster, likely because of the withdrawal of international aid. This highlights the importance for countries facing high levels of disaster risk to smooth their recovery over time.

Managing disaster risk is a multi-dimensional issue and should consider the following factors: the type of disaster risk faced (like droughts, floods, earthquakes etc), the frequency with which they occur and what their impact is likely to be on the population and the economy. Poor understanding of these factors can lead to ineffective disaster risk management policies.

Profiling a country’s risk based on historical evidence, however, could help.

For example, the paper finds that Nepal is ‘multi-risk’ because it is exposed to a range of shocks such as floods, epidemics and earthquakes – although in Nepal’s case they tend to happen less frequently but have a higher impact: in April and May 2015, two earthquakes significantly hampered the national economy and resulted in over 5.5 million people requiring immediate assistance, according to the Emergency Events Database.

Conversely, countries in the Sahel region, like Chad and Mali are ‘mono-risk’, in that they face similar types of disasters – generally drought – which tend to occur more regularly. For instance in 2001- 2011, Mali experienced five droughts, equating to one disaster every two years.

This profiling is important to decide where to target funds for managing disaster risk.

International bodies go some way to tackle these issues by grouping countries according to the risks they face. The U.N., for example, recognises Small Island Developing States as a group of countries that face greater disaster risk due to their small size, remoteness, narrow resources and export base. They also have a high exposure to external economic shocks and environmental challenges like climate change.

Similarly, landlocked developing countries face vulnerabilities from a lack of territorial access to the sea, isolation from world markets, as well as high transit and transportation costs.

But further analysis to tailor funds based on risk is needed. By analysing BRACED countries– the majority of which fall under the least-developed country category – the paper finds great diversity in terms of hazard risk profiling, even though all 12 countries are found to have been disproportionately affected by disasters.

Grouping countries helps to understand parallels in recovery processes but differences in risk must be taken into account before investing in national disaster management strategies.

And it’s not just countries and disasters that require profiling: populations’ vulnerabilities – the extent to which they are able to withstand shocks and stresses – are not consistent across the developing world, or even within a country over time.

In May 2017, the U.N. and Mexico will host the 5th Global Platform for Disaster Risk Reduction, a bi-annual summit that aims to improve disaster risk reduction through better coordination among actors like governments, practitioners, scientists and NGOs.

One of the biggest challenges for leaders attending the event will be to prioritise risk based on the vulnerabilities faced by individual countries, and in doing so, view risk and vulnerability in a multi-dimensional way.

By tailoring disaster risk reduction strategies in this way, countries will be able to better bounce back from shocks and stresses, reduce their reliance on short-term humanitarian assistance and support a smooth recovery.

This post, co-authored with Charlotte Rye of ODI, was first published by the Thomson Reuters Foundation. You can view the original version here:

Catherine Simonet is a development economics researcher at the Overseas Development Institute. Her research focuses on climate change adaptation, environmental and economic vulnerability and food security in sub-Saharan Africa and Least Developed Countries. She holds a PhD. from the Centre d’Etudes et de Recherches sur le Développement International.

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