Experience of detailed assessment in ECLAC (direct and indirect impacts) (ECLAC) Experience of macro- economic aspects in ECLAC (ECLAC)

ECLAC’s methodology as a tool What it does What it does How it does it How it does it What it provides What it provides Past and present experience Past and present experience Contribution to the future Contribution to the future Disaster’s impact reduction Disaster’s impact reduction Social and economical Social and economical Investment in increased resilience Investment in increased resilience

Conceptual considerations Natural Hazards Natural phenomenon with the potential of inflicting damage and human, economic and financial losses NZ= p(NP) Vulnerability Susceptibility for damage and human, economic and financial losses V=p(NP, HS) RISK Probability and magnitude of damage and losses R=f(NZ, V)

Assessment Methodology Damage To Assets Changes in Economic Flows Reconstruction Of Assets - Changes in Macro- Economic Performance - Welfare impact Financial gap (fiscal and InvestmentPortfolio) Cyclone or hurrican e

The assessment (following the methodology) the concepts of social sector the concepts of social sector What are the components of social sector What are the components of social sector Housing (the basic unit of analysis being men, women and children integrated into families) Housing (the basic unit of analysis being men, women and children integrated into families) What are the critical facilities to be assessed: What are the critical facilities to be assessed: Health and water (looking beyond hospitals and infrastructure to quality, coverage and level of services) Health and water (looking beyond hospitals and infrastructure to quality, coverage and level of services) Education (extend it as a prevention and disaster reduction tool) Education (extend it as a prevention and disaster reduction tool) the differential vulnerabilities based on quality of stock of housing, school or health facilities, water and geographic location. the differential vulnerabilities based on quality of stock of housing, school or health facilities, water and geographic location.

Estimating the socio-economic effects of disasters Secondary (global and cross cutting) effects Effects on people, & the flow of goods & services Effects on people & stock of property Direct impact DAMAGE (STOCKS) Indirect impact LOSSES (FLOWS) Impact on macro-socio economic variables*

What is obtained A quantitative and qualitative assessment of the impact of the disaster (direct & indirect assessment of damages) A quantitative and qualitative assessment of the impact of the disaster (direct & indirect assessment of damages) Implication on diverse indicators of the economic and social conditions in the country or region affected. Implication on diverse indicators of the economic and social conditions in the country or region affected.

Sector by sector valuation methodology Social Sectors Social Sectors Housing Housing Health Health Education, culture, sports Education, culture, sports Infrastructure Infrastructure Transport and communications Transport and communications Energy Energy Water and sewerage Water and sewerage Productive sectors Productive sectors Goods: agriculture, industry Goods: agriculture, industry Services: commerce, tourism, etc. Services: commerce, tourism, etc. Global impact Global impact On the environment On the environment Gender perspective Gender perspective Employment and social conditions Employment and social conditions Macroeconomic assessment Macroeconomic assessment

Sources of information Strategic sources The press Maps Verification visits Surveys Quick appraisal Household surveys Expert’s quick appraisal Secondary sources Census National or regional reports Interviews Remote sensing data Sistemas de información geográfico

How is information organized and obtained? Towards a standardized template, in a simple excell worksheet: - The mexican experience - The Gujarat effort - The possibilities and the difficulties - Varying institutional (sources of information) arrangements - Varying quality of information - Varying measurement units - Adapt to local conditions How is information organized?

HUMAN IMPACT VictimsHealthEducationj NATURAL HABITAT / ENVIRONMENT -Water (quality and quantity, retention and control) -Air (pollution, clean) -Biodiversity and integral ecosystem management (impact at global, macro and micro systems) FINANCIAL - Credit access - Land tenure - Legal ownership and empowerement (differential access to credit PHYSICAL INFRASTRUCTURE Type and quality of settlements and housing -Communications and transport infrastructure -Other built infrastructure and vulnerability SOCIAL ASPECTS -Networks and systems (security, safety and solidarity) -Family units, extended links -Violence and security Integrated systemic impact

The profile changes in the face of disaster’s differential impact on each one ofthe five corners

Measuring the damage gap (delta) Non-disaster conditions (ex ante) Expected performance (without disaster) 3-5 years Disaster impact (ex post) 3-5 years The measure Of direct and indirect damages Upon the non-disaster situation (sector by sector baselines) is aggregated into the national accounts and determines the resulting disaster- caused scenario, as the gap over the expected performance prior to the event. Several scenarios may be outlined, based on the assumptions made for the reconstruction process

* * * * TIME GROSS CAPITAL FORMATION DEVELOPING COUNTRIIES INDUSTRIALIZED COUNTRIES *DISASTER THE EFFECT OF SUCCESSIVE DISASTERS ON CAPITAL FORMATION Adapted from Mora, “El impacto de los desastres, aspectos sociales, polítifcos económicos, ambientales y su relación con el desarrollo de nuestros países (BID, 1999)

Future Scenarios 1 st. Scenario: damage assessment and event’s impact, without including reconstruction actions 1 st. Scenario: damage assessment and event’s impact, without including reconstruction actions Alternative reconstruction scenarios Alternative reconstruction scenarios Taking into account no longer the replacement but the reconstruction costs Taking into account no longer the replacement but the reconstruction costs Emerging reconstruction priorities, sector by sector Emerging reconstruction priorities, sector by sector The emerging reconstruction strategies in the immediate weeks after the disaster The emerging reconstruction strategies in the immediate weeks after the disaster The economy’s absorption capacity of foreign resources The economy’s absorption capacity of foreign resources The economy’s capacity to execute projects The economy’s capacity to execute projects The performance of key economic variables in the face of an increase or impending reorientation of resources for reconstruction: interest rates, indebtedness, inputs and production means availability (raw materials, capital goods, domestic saving, labour force, etc.) The performance of key economic variables in the face of an increase or impending reorientation of resources for reconstruction: interest rates, indebtedness, inputs and production means availability (raw materials, capital goods, domestic saving, labour force, etc.)

The situation after the disaster From sectoral valuations assess the value-added changes expected for every sector in a short term/medium-term period (3-5 years or more) Based on input-output tables, SAMs or sector weighing factors, determine the projection of damages of one sector to the others A damage scenario is built (taking into account the measured losses at replacement value) and variations in the main economic gaps, GDP, BOP, public finances, prices and inflation, employment and gross investment

Summary Table

Looking back: What has actually happened, examples from Mitch Modelling dynamics Use economic and econometric tools A simplified graphic analysis

MITCH SEQUIA

MITCH TERREMOTO SEQUIA

MITCH SEQUIA

Basic steps Macroeconomic assessment sequence Role of the macroeconomist Establishment of a baseline Assessment of the economic situation following the disaster (effects on economic growth and income and then on private, fiscal and external accounts

Phases in macroeconmic assessment Quantifiable effects of the disaster on the economic growth as a whole and on the main aggregates GDP National income Investment, gross capital formation Economic gaps (private, public, external) Inflation, balance of payments

Phases in macroeconomic assessment The most difficult task is to verify the consistency of different estimations by comparing the evolution of macroeconomic variables with that obtained by putting together sectoral, regional or partial information

Phases in macroeconomic assessment Most importantly, macroeconomic assessment provides a basis on which to estimate the financial and technical cooperation that the international community is expected to contribute during the rehabilitation and reconstruction processes

Macroeconomic models There is no such a model as “one size fits all” Some apply stock-flow and circuit approach models Others apply models looking for compatibility of a set of economic configurations fixing some parameters (fiscal stance, elasticities)

Policy implications Natural disaster exposure is not unlike other exposures to risk (financial and commercial) Risk exposure has a positive correlation with poverty: disasters are not evenly distributed neither in their occurrence or impact There is a regressive nature to economic, social and other impacts Measurement of natural phenomena’s strength and recurrence or direct asset losses does not give the real image of disaster’s perverse consequences The main stakeholders in a disaster are its victim (actual or potential) Imperfect or non-active markets require government intervention

Macroeconomic models Considering data limitations on disaster evaluations, the use of consistency models is an alternative that can provide quick and reliable estimations, given specific parameters and assumptions. However, final decision should be made on a case–by-case basis

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