Fiscal Resilience to Natural Disasters
Lessons from Country Experiences
Natural disasters continue to cause widespread damage and losses, with fast growing economies particularly exposed. Governments often shoulder a significant share of the costs of disaster recovery and reconstruction. This is true in OECD countries and even more so in developing economies, where private insurance markets are not as well developed. The fiscal impact of disasters on a government’s budget can be sizeable. Expenditures for the government arise from both explicit and implicit commitments to compensate for disaster losses. This report presents the results of a study that compares country practices in the management of the financial implications of disasters on government finances for a set of OECD member and partner countries particularly exposed to natural hazards.
Introduction
Large-scale catastrophic and smaller recurrent disasters In the remainder of this document, the term “disasters” refers to disasters resulting from natural hazards and excludes any other type of disaster. generate considerable economic losses. Over the past 30 years, damages from major disasters have increased significantly. In the last ten years alone, both high-income and fast-growing middle-income economies have experienced an estimated USD 1.2 trillion in economic costs from disruptive shocks due to hazards such as storms or floods (OECD, 2014a). Single shocks, such as recent earthquakes in New Zealand and Chile, have caused damages in excess of 20% of gross domestic product (GDP), with local economies and populations disproportionately affected. Disasters also take a tragic toll on development and poverty reduction by forcing an estimated 26 million people into poverty every year (Hallegatte et al., 2017).