Moody’s: Emerging Asia and Caribbean are most vulnerable regions to natural disasters

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New York, November 28, 2016 — Direct damages from natural disasters cost almost 1.5% of GDP per year on average across countries globally as the incidence of natural catastrophes has increased over the past 35 years, says Moody’s Investors Service in a report that analyzes the exposure to natural disasters of 125 Moody’s rated sovereigns.

“Natural disasters can affect a sovereign’s debt repayment capacity by affecting a country’s economic resilience, fiscal strength and susceptibility to event risk,” said Elena Duggar, an Associate Managing Director at Moody’s. “Susceptibility to disasters varies significantly across countries.”

While the average annual damage between 1980-2015 was 0.3% of GDP in developed economies, it was 1.5% of GDP in emerging markets as a whole, and reached 3.6% in the Caribbean region.

Asia is the most affected region in terms of natural disaster occurrence and affected population, due to its geographic features and population density. The Caribbean region has experienced the highest damages globally as a share of GDP. In the period 1980 to 2015, the three countries with the highest annual percentage loss of GDP due to natural disasters were Mongolia (20.1%), Maldives (18.5%) and Belize (9.3%).

These extreme events are typically associated with a fall in economic output, as well as deteriorating external and fiscal balances. Debt-to-GDP ratios also rise as sovereigns increase their borrowing to help finance reconstruction efforts. Natural disasters can also increase poverty as they tend to have a disproportionate impact on the poorer parts of the population.

Moody’s report also shows that emerging economies are less insured against natural disasters. Data from reinsurance company SwissRe shows that over 40 percent of the direct losses from natural disasters are insured in developed countries, while only 5 percent are in low income countries.

Private sector insurance plays an important role in mitigating the adverse impacts of disasters in advanced economies. By contrast, developing countries rely on governments for post-disaster relief, placing a heavy burden on public finances and giving rise to sovereign contingent liabilities.

 

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Source: The Insiderstories
Moody’s: Emerging Asia and Caribbean are most vulnerable regions to natural disasters

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