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Fiscal Resilience to Natural Disasters

Lessons from Country Experiences

image of Fiscal Resilience to Natural Disasters

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.

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Costa Rica

Located between the Caribbean Sea and the North Pacific Ocean, along the subduction zone of the Caribbean and Cocos tectonic plates, Costa Rica is exposed to several natural hazards, which are themselves influenced by several large-scale climate phenomena such as the El Niño-Southern Oscillation. As much as 36.8% of Costa Rica’s landmass is exposed to three or more natural hazards; 77.9% of its population and 80.1% of its gross domestic product (GDP) are located in areas exposed to multiple hazards (World Bank, 2005). The most severe economic impact in the past four decades has been from earthquakes and hurricanes, followed by floods.

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