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Economic Costs of Disasters Underestimated by 60 Percent


The impact of extreme natural disasters is equivalent to a global $520 billion USD loss in annual consumption, and forces some 26 million people into poverty each year, a new report from the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) reveals. The loss outstrips all other estimates by as much as 60 percent.

"Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters", launched at COP22 in Marrakesh this week, warns that the combined human and economic impacts of extreme weather on poverty are far more devastating than previously understood.

“Severe climate shocks threaten to roll back decades of progress against poverty,” said World Bank Group President Jim Yong Kim. “Storms, floods, and droughts have dire human and economic consequences, with poor people often paying the heaviest price. Building resilience to disasters not only makes economic sense, it is a moral imperative.”

The report assesses the benefits of resilience-building interventions in the 117 countries studied. These include early warning systems, improved access to personal banking, insurance policies, and social protection systems (like cash transfers and public works programs) that could help people better respond to and recover from shocks. It finds that these measures combined would help countries and communities save $100 billion a year and reduce the overall impact of disasters on well-being by 20 percent.

Efforts to build poor people’s resilience are gaining ground, the report shows. For example, Kenya’s social protection system provided additional resources to vulnerable farmers well before the 2015 drought, helping them prepare for and mitigate its impacts. And in Pakistan, after record-breaking floods in 2010, the government created a rapid-response cash grant program that supported recovery efforts of an estimated 8 million people, lifting many from near-certain poverty.