the real economic cost of disaster and how to build resilience

The Real Economic

Cost of Disaster and

How to Build Resilience

Dr. Justin Ram, Director, Economics Department

Grenada

October 12, 2017

Development,

how will we do

it?

AGENDA

01 Overall Cost of Disasters

02 Impact on Tourism Economy

03 Economic Vulnerability of the Region and how to Build Resilience

04 CDB’s Role

The initial

costs of

natural

disasters

have been

significant

Damages caused by storms in regionselected storms, selected economies

1989 Hugo

434%of Montserrat’s GDP

2004 Ivan

200%of Grenada’s GDP

2017 Irma and Maria Estimates

90%of Dominica’s

GDP

2015 Erika

• Estimates not yet available for

TCI and Dominica

• Dominica anticipated to have

lost over 100% of GDP

• TCI estimated to have 14%

building damage20%

85%

140%

Antigua & Barbuda Anguilla BVI

Secondary

effects have

crippled

economies

for years

Higher public debt ratios

Decline in key industries

Larger trade deficits

Economic and Fiscal Impact of

Natural Disasters

Population migration

Total damages to

the region from

148 disasters

(1950 – 2014)

$52billion

Source: Acevedo, 2016

AGENDA



03 Economic Vulnerability of the Region and how to build resilience

04 CDB’s Role

$100 Tourist Spend

$35-54Added to GDP

same year

$155-160Long term impact

Economic

Impact

Tourism is a key

economic driver

and foreign

exchange earner

for most BMCs

11.2%*

Visitor

Expenditure

BMC GDP

2014

*Direct contribution by BMC varies widely

from 1.5% in TnT to 90.6% in TCI.

Source: CDB/Deloitte

Tourism

supports over

30% of the

labor force in

the most

affected

countries

British Virgin

Islands Anguilla

Antigua &

Barbuda Dominica

51% 41% 26% 35%

Tourism jobs

Share of all jobs

3,000 1,500 6,000 4,000

84% 59% 54% 32%

%GDP from

tourism in 2014

Source: CDB/Deloitte, World

Travel and Tourism Council

9,000 4,500 19,500 11,500Total jobs(direct and indirect)

Environmental

damages

threaten this

positive

economic

impact

Factors determining tourism’s economic impact

Source: CDB/Deloitte

Before Irma

Codrington, Barbuda

The Caribbean

is one of the

most tourism-

dependent

regions in the

world

Most of the productive capital stock that supports the Caribbean tourism sector exists along the coastlines and tend to be most vulnerable.

The impact of a natural disaster is felt mostly in the destruction of thecapital stock.

Source: Bueno et al, 2008

After Irma

Before Irma

Road Town, Tortola After Irma

Road Town, Tortola Before Irma

Sint Maarten Port After Irma

Sint Maarten Port Before Irma

Paraquita Bay, BVI After Irma

Paraquita Bay, BVI

We anticipate

a slowdown in

visitor arrivals

as some ports

and hotels are

repaired and

travel plans

are rerouted

BMC Visitor Arrivals by type,

1999 – 2014 (thousands)

Although cruise visitors spend less than long stay passengers, they

have driven visitor numbers and expenditure for the past decade

Moved all Eastern

Caribbean itineraries to the

west for next few months

0

2000

4000

6000

8000

10000

12000

14000

16000

1999 2003 2007 2011 2015

Stay-over

Cruise

The impact of

lower visitor

numbers will

multiply

throughout

economies

Source: CTO

In 2015, BMCs had over 22.6M visitors.

If those visitors change travel plans this year due to this

tumultuous hurricane season, the region will miss out on:1%

226,653

$137.8M

$48.2M

$213.6M

Visitors would go elsewhere

Potential expenditure would be lost

Potential 2017 GDP would not be realized

Addition to GDP would be missed over

the long term

+ Additional losses from decreased

tourism employment

The impact of

lower visitor

numbers

multiplies

throughout

the economy

After Hurricane Ivan:

Grenada’s tourism

revenue fell by

of pre-storm levels in the

first high season

10%Annual GDP fell by

24%due to tourism and

agricultural losses

Source: The Economist

AGENDA




04 CDB’s Role

Weak resilience

capacities

magnify our

economic

losses from

disaster

Environmental and Economic Vulnerability

Small size

RemotenessLack of

diversification

Dependence on

external financing

Dependence on non-

renewable energy

Susceptibility to

natural hazards

Other

Regional

Challenges

MacroeconomicLow Productivity &

Competitiveness

Poor Human

Development

Environmental

Threats

Low growth

average 1.1 % over a decade

High debt

regional average 77% of GDP

Low commodity prices and

declining reserves

Jamaica is the 67th country in the WB

Ease of Doing Business – highest BMC

Large infrastructure gaps

Weak governance

Inefficient and costly transport links

and high energy costs

High poverty (43.7%) and youth

unemployment (18-47%)

Poor education outcomes, skills

mismatch and brain drain

High crime and citizen insecurity

High annual natural disaster costs

on average ~2% of GDP

Low insurance payouts

Insufficient building codes

Poor climate change adaptation tools

Caribbean

Blueprint:

A vision

for our

economies

Macroeconomic Productivity &

Competitiveness

Fiscal rules:

• Max debt/GDP

Private sector-led growth

Private sector-funded

infrastructure projects

Sustainable

Society

Stepping back in order to jump better

CCRIF and indemnity insurance

Resiliency funds

Targeted social interventions:

• Good quality education for all

• Conditional cash transfers to

the most vulnerable

Strict building code compliance

Human

Development

Environmental

Preparedness

What if we

had:

01 Strong leadership commitment?

Clear mandates and

implementation plans?02

90% relentless implementation?03

06

04

05

Developed regulatory framework?

Cross Government and stakeholder

ownership and partnership?

High levels of accountability and real-

time data?

Adapted from Gold, 2017

Essential

Elements

for

Success

New Ways of

Working

Transformational

Leadership

Source: PEMANDU, 2017

Implementation

Capacity Stunts

Regional

Delivery

Delayed or ineffective project

implementation

Shared Regional and International Challenges

Weak Implementation Capacity

Insufficient training

Obsolete personnel management systems

Ineffective results accountability systems

Weak decision enforcement culture

Scarce financial resources

Elaborate and promising development

plans

Setting up a

DU:

Best in Class

Performance

Management

Set direction and context

Establish clear accountabilities and metrics

Create realistic budgets, plans, and targets

Track performance effectively

Hold robust performance dialogue

Ensure actions, rewards, and consequences

Source: Barber et al., 2011

Mandate and

Responsibilities

AGENDA




04 CDB’s Role

Enhancing

productivity

and growth

Technical Assistance to support Institutional and Regulatory Reforms

Human capital base strengthening by leveraging

technology to increase access to quality education

Fostering innovation, trade and market

access

ICT infrastructure strengthening through

PPPs

Performance management and delivery units

Public Private Partnership awareness building

and support.

How the

CDB can

assist

Championing reduced inequalities through inclusive projects

CDB offers a

variety of

reconstruction

and resiliency

funding

Emergency Relief Grants Immediate Response Loans

Rehabilitation and

Reconstruction Loans

USD 200K USD 750KUp to

for damage assessments and the provision and transportation of

emergency relief supplies, water and sanitation resources,

roofing materials for emergency shelters and community buildings,

and temporary shelter for displaced persons

Immediate response

Longer-term support

for reducing countries’ vulnerability to future disaster, restoring

key economic sectors to pre-disaster levels, and other efforts

Policy-Based Loans

While natural

disasters capture

headlines and

national attention in

the short-term, the

work of recovery and

rebuilding is

long-term.

Sylvia Mathews

Burwell

the real economic cost of disaster and how to build resilience

Economy & Finance