Massive cost
The impact of Supertyphoon “Yolanda” has quickly reversed the image of the Philippines from an investors’ darling to one that the rest of the world feels sorry for. To describe the cost of damage as massive is to understate it. The loss of thousands of lives is most tragic; after all, the economic damage, although very high, can be repaired by local and international relief and rehabilitation efforts.
The numbers are truly staggering: More than 10 million Filipinos, or a tenth of the population, are affected in 51 cities in 41 provinces. The economic cost of this natural disaster will be unprecedented. Initial estimates varied widely, with a report citing the German-based CEDIM Forensic Disaster Analysis as putting the damage at a minimum $8 billion and a maximum $19 billion. Another report quoting Charles Watson, director of research and development at Kinetic Analysis Corp., a leader in multimodel impact forecasting and risk assessment for catastrophic events, said losses would be $12 billion to $15 billion, or about
5 percent of the Philippines’ gross domestic product. The degree of this cost is, of course, relative. “A $12-billion storm is not really that bad in the United States; for the Philippine islands, it is catastrophic,” Watson was quoted by Bloomberg as saying.
As the affected areas are mainly agricultural, the farm sector bore the brunt of Yolanda. The damage to agriculture as of last week stood at P6.9 billion. The Department of Agriculture said that as of Nov. 13, rice and fisheries areas suffered the most damage at P2.23 billion and
P1.16 billion, respectively. A total of 137,225 metric tons of rice crops were lost and 81,056 hectares of rice fields were affected. The volume of damage to fisheries was 23,191 MT. Yolanda also crippled the fisheries sector in the Visayas as most fishing equipment and infrastructure were damaged, the DA said. The coconut sector lost
P1.5 billion; more than 3 million coconut trees planted in the provinces of Quezon, Guimaras, Iloilo, Negros Occidental, Cebu, Eastern Samar and Leyte were affected. The initial damage to irrigation and other infrastructure was estimated at P1 billion.
But while the region severely affected by Yolanda will see their economy declining by as much as 8 percent next year, the overall economic impact on the country is expected to be minimal. Finance Secretary Cesar Purisima said the economic damage in the mostly agricultural region would likely cut a percentage point off GDP growth in 2014. Private-sector economists are agreed that the impact of Yolanda on fourth-quarter growth will be modest. While the affected region is home to about 20 percent of the population, its contribution to the national economy was smaller at only 12.5 percent of GDP, according to Purisima. Citi economist Jun Trinidad added in a note to bank clients that netting out the contribution of the worst-hit areas from fourth-quarter GDP estimates still gave full-year growth of 6.8 percent, compared with a pretyphoon range of 7.3-7.5 percent. Economists at Nomura also said that in terms of Yolanda’s impact on the overall economic outlook, it did not change the fundamentally strong macro picture that was making the Philippines a regional standout. “Its effects on this year’s growth are likely to be short-lived, posing only a relatively small downside risk to our 2013 GDP growth forecast of 7.3 percent,” said HSBC economist Trinh Nguyen.
Others are even more bullish about 2014. “[The impact of Yolanda] poses some downside risk to growth this year, but it’s going to be relatively short-lived,” Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc., was quoted by Bloomberg. “The recovery would be quick as we go into reconstruction and could push next year’s growth a little bit higher.”
Economists believe that growth usually rebounds quickly after natural disasters due to the big push from spending on reconstruction and rehabilitation efforts. The remittance payments from the millions of Filipinos working overseas can also rise in response to the disaster, as many of them are helping kin affected by the Yolanda.
The damage to life and property is truly catastrophic. But, as in past calamities, Filipinos have proven truly resilient, rebuilding with whatever they have and moving forward with their lives, no matter how difficult. This time is no different although it may take a bit longer.
