Improve resilience or suffer the consequences, warns OECD
May 23, 2019
Global governments must do more to prepare their communities for the onslaught of climate change or face significant fiscal losses, a new report from the OECD has warned.
The Fiscal Resilience to Natural Disasters report estimates that natural disasters have cost both advanced and emerging economies around USD $1.2 trillion in damages and economic losses over the past decade.
On top of the loss of life from recent disasters, earthquakes in Chile and New Zealand in 2010 and 2011 cost 10% and 20% of annual GDP respectively. Japan’s 2011 earthquake, tsunami and nuclear disaster contributed to a 2% economic contraction in the following quarter of that year.
“Central governments absorb a major share of disaster costs, especially in countries where private disaster risk insurance markets are under developed,” said Marcos Bonturi, Director of Public Governance at the OECD.
“Clearer ex-ante rules on burden sharing and more transparent conditionalities on financial assistance would help governments control or limit that cost and ease recovery when disaster actually strikes.”
The report identifies damages to public infrastructure and related service distributions as the major costs related to natural disasters, and are also the most difficult to control.
“Every country will face unique challenges in managing its response,” said Alfonso Garcia Mora, World Bank Global Director for Finance, Competitiveness and Innovation.
“The common thread is the potential for disaster recovery alternatives that will rely on stable markets, strong institutions, international co-operation as well as innovation and technology to improve financial resilience,” he added.