GAR 2015 Main Report

100

Part I - Chapter 5

In lower-income countries, and in particular in countries like SIDS with small economies, disaster losses may challenge an economy’s resilience, that is, its capacity to absorb losses and recover. There is insufficient data and evidence to show whether economic resilience has increased or decreased since the adoption of the HFA.

However, existing evidence on the distribution of risk and countries’ ability to absorb losses points to critical differences related to income levels, insurance coverage, the size and pattern of economies, and the financial capacity of various countries.

5.1 National resilience challenges

Economies can be severely disrupted if there is a high ratio of AAL to the value of capital stock and savings. Similarly, future economic growth can be compromised if there is a high ratio of AAL to capital investment and reserves. Social development will be challenged if there is a high ratio of AAL to social expenditure.

The capacity for future development

AAL can be interpreted as an opportunity cost given that resources set aside to cover disaster losses could be used for development. As highlighted in Chapter 3, in certain income groups and geographic regions, in particular in SIDS and some low-income countries, AAL estimates represent a significant proportion and in some cases surpass levels of capital investment and social expenditure. In those countries, the AAL is also often

significant with respect to other economic progress metrics, such as the existence of reserves or national savings rates. In such circumstances, it is impossible to ensure sustained, let alone sustainable, growth.

Ultimately the capacity of a country to develop sustainably will depend on the combination of these different factors. Economies can be severely disrupted if there is a high ratio of AAL to the value of capital stock and savings. Many countries will not be able to cover their AAL through domestic savings, which may impact their capacity to invest in social and economic development. Countries with high rates of domestic savings will be better able to absorb even high levels of AAL. Similarly, future economic growth can be compromised if there is a high ratio of AAL to capital investment and reserves. Social development will be challenged if there is a high ratio of AAL to social expenditure. Ultimately the countries where development and the achievement of the SDGs will be most challenged by disaster risk are those where the AAL represents a high proportion across all three domains (Figure 5.1).

This highlights that the countries with high risks to development include not only low-income countries such as Madagascar and Haiti but also middle-income countries like Honduras, Jamaica and Philippines, and high-income countries like Greece. Although Jamaica and Greece have a far lower relative AAL compared to the Philippines, Honduras and Madagascar, the negative implications for development are very similar. At the same time, while it is economic growth that

In those countries where AAL significantly exceeds key economic progress metrics, such as average annual GDP growth, national savings rates or the ratio of new capital investment to existing capital stock, it is impossible to ensure sustained, let alone sustainable, growth.

Where countries are not able to buffer and absorb disaster losses, economies can be severely disrupted. A significant number of countries face this challenge even for events that may happen within a 50 to 100-year time span.

	100 Part I - Chapter 5 In lower-income countries, and in particular in countries like SIDS with small economies, disaster losses may challenge an economy’s resilience, that is, its capacity to absorb losses and recover. There is insufficient data and evidence to show whether economic resilience has increased or decreased since the adoption of the HFA. However, existing evidence on the distribution of risk and countries’ ability to absorb losses points to critical differences related to income levels, insurance coverage, the size and pattern of economies, and the financial capacity of various countries. 5.1 National resilience challenges Economies can be severely disrupted if there is a high ratio of AAL to the value of capital stock and savings. Similarly, future economic growth can be compromised if there is a high ratio of AAL to capital investment and reserves. Social development will be challenged if there is a high ratio of AAL to social expenditure. The capacity for future development AAL can be interpreted as an opportunity cost given that resources set aside to cover disaster losses could be used for development. As highlighted in Chapter 3, in certain income groups and geographic regions, in particular in SIDS and some low-income countries, AAL estimates represent a significant proportion and in some cases surpass levels of capital investment and social expenditure. In those countries, the AAL is also often significant with respect to other economic progress metrics, such as the existence of reserves or national savings rates. In such circumstances, it is impossible to ensure sustained, let alone sustainable, growth. Ultimately the capacity of a country to develop sustainably will depend on the combination of these different factors. Economies can be severely disrupted if there is a high ratio of AAL to the value of capital stock and savings. Many countries will not be able to cover their AAL through domestic savings, which may impact their capacity to invest in social and economic development. Countries with high rates of domestic savings will be better able to absorb even high levels of AAL. Similarly, future economic growth can be compromised if there is a high ratio of AAL to capital investment and reserves. Social development will be challenged if there is a high ratio of AAL to social expenditure. Ultimately the countries where development and the achievement of the SDGs will be most challenged by disaster risk are those where the AAL represents a high proportion across all three domains (Figure 5.1). This highlights that the countries with high risks to development include not only low-income countries such as Madagascar and Haiti but also middle-income countries like Honduras, Jamaica and Philippines, and high-income countries like Greece. Although Jamaica and Greece have a far lower relative AAL compared to the Philippines, Honduras and Madagascar, the negative implications for development are very similar. At the same time, while it is economic growth that In those countries where AAL significantly exceeds key economic progress metrics, such as average annual GDP growth, national savings rates or the ratio of new capital investment to existing capital stock, it is impossible to ensure sustained, let alone sustainable, growth. Where countries are not able to buffer and absorb disaster losses, economies can be severely disrupted. A significant number of countries face this challenge even for events that may happen within a 50 to 100-year time span.	Page 1 Page 10 Page 20 Page 30 Page 40 Page 50 Page 60 Page 70 Page 80 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 ->Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108 Page 109 Page 110 Page 111 Page 112 Page 113 Page 114 Page 120 Page 130 Page 140 Page 150 Page 160 Page 170 Page 180 Page 190 Page 200 Page 210 Page 220 Page 230 Page 240 Page 250 Page 260 Page 270 Page 280 Page 290 Page 300 Page 310