Fragile prosperity: natural disasters and economic growth in Small Island Developing States

The paper examines the relationship between climate-related natural disasters and economic growth in developing countries, with a specific focus on Small Island Developing States (SIDS). Using advanced econometric methods (system GMM), it analyzes how different types of disasters affect growth trajectories, emphasizing the unique structural vulnerabilities of SIDS — such as geographic exposure, limited diversification, and reliance on tourism and services.

Findings show that SIDS suffer disproportionately severe medium-term economic setbacks following disasters compared to other developing nations. Sectoral impacts vary: storms heavily affect services (especially tourism), while floods damage industrial growth. The study concludes that economic diversification is crucial to reducing vulnerability, strengthening resilience, and mitigating disaster-driven economic shocks.