Economic Impacts Of Natural Disasters

Our country and region have endured the wrath of Moth­er Nature several times re­cently. While every year has its fair share of calamities, the past few years have seen an
14 Apr 2018 11:00
Economic Impacts Of Natural Disasters
Flooding seen along Naqali Road in Naitasiri on April 11, 2018.. Photo: Ronald Kumar

Our country and region have endured the wrath of Moth­er Nature several times re­cently.

While every year has its fair share of calamities, the past few years have seen an extraordinary spate of natural disasters and atypical weather patterns.

Natural disasters such as earth­quakes, floods, cyclone or hurri­canes inflict serious damage and so has serious repercussion for the economy.

Natural disasters destroy tangible assets such as buildings, equip­ment and infrastructure.

It also hinders productivity as working hours are reduced therefore lowering the supply of goods and services in the economy.

In extreme circumstances, these adverse weather conditions even lead to substantial losses forcing businesses to cease operations if they are unable to recover the loss­es incurred from physical damages to their stock or capital or due to prolonged closure of their business operations.

Other additional costs to the econ­omy from natural disasters include lost wages, lower output, utility dis­ruptions, the destruction of public and private property, additional commuter time, transportation costs and the painful loss of lives.

The nature of these destructive events, as well as their effect on the economy, varies considerably. Some natural disasters, such as cyclones, tend to be short-lived events, last­ing only several hours, causing mass destruction spanning only several areas.

Others, such as droughts, last rel­atively longer and spread its dam­aging effects over a larger expanse of land.

However short or long lived it may be, natural disasters can leave an economic imprint that can linger for years.

Losses from natural disasters manifest themselves in numerous ways but may never be estimated with absolute certainty as several factors are often overlooked, in­tertwined or extremely difficult to measure.

Typically, the greatest effects on output, employment, wages and the capital stock occur at the local or regional level but the effect could also pass on at the national level if economic activity is sufficiently ob­structed across regions of the coun­try, or if it affects the vast majority of the population or an important industry.

Less obvious – but perhaps even more noteworthy – are the effects that a natural disaster can have on commodity prices, such as the price of farm produces and yaqona in our local context.

The economic cost further extends post natural disaster due to recov­ery efforts such as rehabilitating or rebuilding the infrastructure, housing or assisting the displaced and affected populace and in re­gaining a state of normalcy in the supply chain.

Economic losses from disasters therefore, hinders sustainable de­velopment, and the availability of funds for poverty reduction pro­grammes, health, education and investment in infrastructure, as these funds are redirected to help recovery in disaster stricken areas.

According to the analysis by AON International, natural disasters the world over have caused an in­flation- adjusted US$3.6 trillion (FJ$7.26tr) in economic losses to date, with insurers paying out more than US$960 billion (FJ$ 1936.27bn) over the same period.

Some of the costliest natural dis­asters to hit the globe over the past two decades include the Tohaku Earthquake /Tsunami in Japan in 2011, which had an economic cost of US$221.6 billion (FJ$ 446.96bn).

The Atlantic Hurricane Season, which struck U.S., Mexico, Carib­bean and the Bahamas in 2005, cost US$209.2 billion (FJ$ 421.95bn).

Sichuan Earthquake recorded approximately US$92.5 billion (FJ$186.57bn) in China in 2008.

The 2011 floods of Thailand cost US$47 billion (FJ$ 94.80bn).

Fiji has also experienced many such catastrophic impacts of Moth­er Nature, with the worst being the Category 5 Tropical Cyclone Win­ston in 2016.

The estimated damage and loss from the cyclone amounted to FJ$1.42 billion, equivalent to 31 per cent of gross domestic prod­uct (GDP), as per the analysis con­ducted by the Asian Development Bank.

For individuals, anticipating such losses and preparing for it in ad­vance is definitely the best bet.

This means taking preventative measures to reduce the risk of loss of life or property from a future hazardous event.

Some factors individuals may con­sider in preparation for natural disasters may include (but are not limited to):

  • Having a disaster plan – knowing what to do, where to go and whom to contact is essential
  • Taking heed of disaster n tices and preparing for it in adequate time
  • Having your property, life, and stock appropriately in­sured so that losses can be sufficiently spread
  • Keeping all your financial records and essential docu­ments well stored, preferably scanned and saved in cloud storage to allow for seamless verification and assessments in times of insurance claims
  • Saving enough funds to use in case of natural disasters


Although natural disasters cannot be avoided, there are steps indi­viduals and businesses can take to minimise the damage and losses caused by them.

Simple preventative measures tak­en before a natural disaster strikes may help residents protect their life and property.

None-the- less, it is worthy to high­light that Fiji has proven to have a strong national structure for dis­aster preparedness and emergency operations.

While natural disasters negatively affect the nation’s GDP and income generation capacity, the fiscal re­construction stimulus, and the ad­ditional demand for investment to replace destroyed capital leads to a boost in economic activity in the long run.

Moreover, damaged infrastructure may be replaced by more efficient ones, built with updated technology and meeting current standards.

The rehabilitation phase may also lead to increased retail sales or consumer spending and may boost employment in the short run due to increased demand for repair and reconstruction works.


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