Global Assessment Report on Disaster Risk Reduction 2015
Making development sustainable: The future of disaster risk management

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Note: MFIs = multilateral financial institutions.
Part I - Chapter 5
In addition to ex-ante financing mechanisms, investments in disaster risk reduction measures are expected to significantly reduce the expected negative impact of disasters on economic growth (UNISDR, 2013a

UNISDR. 2013a,Global Assessment Report on Disaster Risk Reduction: From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction, Geneva, Switzerland: UNISDR.. .
). Previous analysis has shown, for example, that a 1-in-100-year event in Honduras could produce direct losses of up to 33 per cent and additional indirect and cumulative losses of up to 24 per cent of GDP. New simulations of real GDP growth after historical disaster impacts in Honduras—with and without previous disaster risk reduction investments—show that these losses could be significantly reduced by investing in risk reduction.
4 Interestingly, the simulations also show that in a country such as Honduras, where high-intensity disasters occur relatively frequently, even larger investments targeted at reducing the risk of large-scale events make financial and economic sense.
In countries with very low rates of capital investment, recovery may take years if disasters destroy a significant proportion of their capital stock. Countries with small and vulnerable economies
have particularly low resilience, as their entire economy may be devastated; if they also have limited fiscal manoeuvrability, they may also have difficulties financing a recovery (UNISDR, 2009a

UNISDR. 2009a,Global Assessment Report on Disaster Risk Reduction: Risk and Poverty in a Changing Climate, Geneva, Switzerland: UNISDR.. .
The cumulative effect of disaster loss on fixed capital may be dramatic in SIDS such as Vanuatu (Figure 5.5) or small countries like Belize.5 It is estimated that Belize has lost almost 18 per cent of its accumulated capital investment since 1970 due to the cumulative effects of disasters over the past 20 years. For Vanuatu, this amounts to a full 24 per cent of capital investment since 1970. However, even in higher-income small island states, economic losses can also have a highly disruptive effect on economic development. For example, the Cayman Islands suffered significant losses from Hurricane Ivan in 2004 and its economy still has not recovered fully, leading to a reduction of cumulative capital investment by almost 23 per cent since 1970.
In contrast, large economies such as China or Mexico seem to have sufficient capacity to absorb
(Source: Mochizuki et al., 2014

Mochizuki, Junko, Stefan Hochrainer, Keith Wil-liges and Reinhard Mechler. 2014,Fiscal and Economic Risk of Natural Disasters in Comoros, Mauritius, Seychelles and Zanzibar, CATSIM Assessment (Preliminary Result). Risk Policy and Vulnerability Program, International Institute for Applied Systems Analysis (IIASA).. .
Figure 5.4 Financing gap for cyclone wind and earthquake risk in Mauritius
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