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Economic loss

Source(s):  United Nations Office for Disaster Risk Reduction (UNDRR) [ 2 February 2017 ]

Total economic impact that consists of direct economic loss and indirect economic loss. Direct economic loss: the monetary value of total or partial destruction of physical assets existing in the affected area. Direct economic loss is nearly equivalent to physical damage. Indirect economic loss: a decline in economic value added as a consequence of direct economic loss and/or human and environmental impacts. Annotations: Examples of physical assets that are the basis for calculating direct economic loss include homes, schools, hospitals, commercial and governmental buildings, transport, energy, telecommunications infrastructures and other infrastructure; business assets and industrial plants; and production such as crops, livestock and production infrastructure. They may also encompass environmental assets and cultural heritage. Direct economic losses usually happen during the event or within the first few hours after the event and are often assessed soon after the event to estimate recovery cost and claim insurance payments. These are tangible and relatively easy to measure. Indirect economic loss includes microeconomic impacts (e.g., revenue declines owing to business interruption), mesoeconomic impacts (e.g., revenue declines owing to impacts on natural assets, interruptions to supply chains or temporary unemployment) and macroeconomic impacts (e.g., price increases, increases in government debt, negative impact on stock market prices and decline in GDP). Indirect losses can occur inside or outside of the hazard area and often have a time lag. As a result they may be intangible or difficult to measure.

  • About the Terminology The UNDRR Terminology aims to promote a common understanding and usage of disaster risk reduction concepts and to assist the disaster risk reduction efforts of authorities, practitioners and the public.

Please note: The 2009 Terminology was updated following the request of the Sendai Framework for Disaster Risk Reduction (paragraph 50), which recommended the establishment of an open-ended intergovernmental expert working group.