By Bindu N Lohani of the Asian Development Bank
Coconut farmers in the Philippines, factory workers in Thailand and the fishing community in Indonesia know a hard truth about the losses wrought by natural hazards: lost income can significantly stall a community’s recovery, pulling those who survive deeper into a cycle of poverty and loss that’s hard to break.
Aid organizations have responded at the community level by focusing on cash-for-work schemes. But cash-for-work can only go so far. It cannot protect against lost income; it cannot provide enough cash to get industry going again; and it cannot provide meaningful employment over the many months of long-term recovery.
This is why better access to disaster risk financing – which spreads the risks and provides financing for immediate response, recovery, and reconstruction – is desperately needed.
It’s hard to imagine the scale of destruction following the typhoon that hit the Philippines on Friday, killing an estimated 10,000 people and leaving a trail of devastation.
However, despite Haiyan being one of the strongest typhoons ever recorded, the impact on the Philippines economy may be relatively slight, and the reconstruction effort may even boost GDP. While that is hardly a comfort to people without homes or in mourning, an economic slump would be a double whammy better avoided.
Central Europe’s recent floods looked dreadful on television. And they will have scarred the memories of the people who were hit the hardest. But the economic effects will be limited thanks to the solid defences put in place since the last flood a decade ago.
So says Erste Bank, which argues that while the floods were similar in scale to those of 2002, the costs for Austria, the Czech Republic, Slovakia and Hungary, will be a small fraction of 2002′s €6bn.
The Czech authorities have declared a national emergency following days of heavy rains that have left up to five people dead and several towns in the south and west of the country under water.
A rising tide of milky-coffee-coloured water in the River Vltava is threatening to spill over into the historic centre of the capital Prague and tourism officials are already beginning to estimate the potential losses to a washed out season.
Anyone ever stuck in Bangkok traffic is probably thrilled that Thai car sales are set to fall steeply this year but, perhaps surprisingly, car executives are still bullish on the country.
Why? Not because they think they can convince locals to keep buying cars for their slow commutes but because the country, despite devastating floods in 2011, is still an attractive manufacturing base for exports to the rest of the fast-growing Asean region.
First there was the world’s largest ice rink. Then there were the beaches, complete with sand and plastic palms. Most recently, there was the tallest Christmas tree.
Marcelo Ebrard, Mexico City’s mayor, is rarely short of an idea. And this week, as an earthquake measuring 6.3 on the Richter scale shook Mexico’s capital, he had another: a smartphone app that alerts residents to forthcoming tremors.
With the flood waters still washing through Thailand, assessments of their impact on the economy are steadily becoming more gloomy. On Thursday, Barclays Capital raised its estimates of the cost to 3-4 per cent of GDP from 2-3 per cent.
Down go forecasts for GDP growth for this year and next, and for export-oriented production of electronics, vehicles and food. The only silver lining is that the disaster could prompt the central bank to cut interest rates, possibly as soon as its next meeting on November 30.
Thailand looks like it could be the next to join the doves, who’ve already popped up in Turkey, Brazil, and most recently Indonesia. On Wednesday, the Bank of Thailand held rates at 3.50 per cent, as expected – but one dissenting voice called for a cut.
Aside from the human cost, the tough thing about floods - like those hitting the country right now - is that they have a double impact on the economy: knocking short-term growth while raising short-term inflation. The BoT faces a tough task.
The Thai government is pressing ahead with a large minimum wage increase despite appeals from companies concerned about the financial impact of the worst floods in 50 years.
Wages in Bangkok and six other relatively prosperous provinces will be increased by around 40 percent to 300 baht (£6.20) a day from April next year, the government announced after a meeting with employers and trade union representatives on Monday. The wage increase was a key campaign pledge of Yingluck Shinawatra, the recently elected prime minister.