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Macro-Disasters

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Earlier this month, Japan experienced one of the worst natural disasters in its history, an earthquake and subsequent tsunami that claimed the lives of thousands of people and drastically changed the lives of countless more. Sadly, this tragedy is another in a string of natural disasters that have occurred over the past few years, such as the earthquakes in Haiti and Chile, wildfires in Russia, and floods in Pakistan, West Africa, Sri Lanka, Brazil, and Australia. Over the past 10 years more than 2.6 billion (yes, billion with a "B") have been affected by natural catastrophes, compared with 1.6 billion in the previous decade. What's more, the IMF estimates that the costs of damages from natural disasters are 15 times higher than they were in the middle of the twentieth century.

So why the drastic increase? Why have natural disasters escalated in both frequency and severity? A growing body of research suggests a link between climate change and the occurrence of hydro-metrological disasters--especially floods and droughts--over the past two decades. To be sure, the number of such disasters has gone from some 150 per year in the 1980s to more than 370 per year in the late 2000s.

Given all of the above, we would expect countries and international aid organizations to systematically and uniformly develop plans aimed at preventing and mitigating the effects of natural disasters. Unfortunately, recent analysis by the Bank's Independent Evaluation Group (IEG) suggests that this is not always the case. In his recent addition to the Economic Premise series, It is Time to Factor Natural Disasters into Macroeconomic Scenarios, IEG Director-General Vinod Thomas argues that there is room for improvement in disaster planning. "Macroeconomic scenarios, even in countries that are regularly hit by natural catastrophes, seldom take into account the effects of their increasing incidence, damage, and costs," says Thomas.

Drawing on evaluative lessons from the World Bank's experience, Thomas concludes that urgent investments need to be made in climate change mitigation, disaster preparedness, early response, and post disaster reconstruction. In order to mitigate the effects of natural disasters, relief efforts should focus on victims' basic needs (e.g. food, water, and safety), involve realistic timeframes for recovery, provide the necessary financial resources (e.g. cash support, emergency loans, and credits), and strengthen local capacity. In short, macroeconomists can no longer treat natural disasters as "tail" events.

For an overview of best practices in managing disaster relief, be sure to check out the latest in the World Bank's Economic Premise series today.

This blog was originally posted on the World Bank Institute Growth and Crisis website.