Measuring natural risks in the Philippines:
socioeconomic resilience and wellbeing losses

 

The Philippines are by some measures the most disaster-affected country in the world, with annual asset losses estimated at PHP 175 billion (US$3.5 billion) per year, equivalent to 1.2% of GDP. Across its 7,500 islands, the Philippines is exposed to typhoons, earthquakes, flooding, storm surges and tsunamis, and even individual events can sometimes have far-reaching consequences for poverty incidence and overall economic development in the country.

 

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One challenge to define priorities for public policies is the assessment of the impacts of natural disasters not just on assets and infrastructure, but on people, taking into account their livelihood and ability to cope with and recover from shocks.

The real impact of disasters on the population’s wellbeing depends not only on the direct impact, but also on the duration of the recovery and reconstruction period and on the tools affected populations have to cope with and recover from the shock, such as social transfers, formal and informal post-disaster support, savings, insurance, and access to credit. The ability of the population to cope with and recover from disaster is what we define as the 'socioeconomic resilience' and is an important determinant of the 'wellbeing losses' caused by disasters.

To better understand the real impact of natural disasters on the population of the country, the National Economic and Development Authority (NEDA) performed a risk and resilience assessment at the regional level, using the Socio-Economic Resilience methodology developed by the World Bank and Global Facility for Disaster Reduction and Recovery (GFDRR).


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Disaster risk metric: asset losses

This figure maps total asset risk, expressed at left in US$. In total, the Philippines experiences US$1.4 billion in asset losses per year. This risk is the average asset losses one can expect in any given year in the Philippines because of coastal and river floods, typhoons, earthquakes, and tsunamis in the country. Part of these losses is caused by the very frequent disasters that happen several times a year. Part is caused by truly exceptional events, such as big earthquakes.

These losses consist of the cost to repair or replace damaged assets like buildings, roads and bridges, factories, etc. The figure shows that asset risk in the Philippines is highly concentrated in the Capital Region. This is mostly because the Capital Region is where the concentration of valuable assets is the highest and therefore where potential losses are the largest.

But these aggregated losses do not show how these losses affect people, and especially the poorest and most vulnerable. To investigate this question, we look at how regional losses affect families at different income levels.  


Disaster risk metric: consumption poverty

This figure shows in black the distribution of levels of consumption in the region II – Cagayan Valley. The large majority of families in the region consume between 10,000 and 30,000 pesos per year.

Just below, this figure shows in pink the same distribution, but after the 100-year typhoon hit the region – it’s a typhoon that happens on average once every 100 years (even though this is an average, and such a typhoon can occur twice in the same year, or not at all for 100 years!).

As the figure shows, if a typhoon hits the region, the consumption of many people is reduced. It is reduced because they have lost their sources of income (e.g., their shop has been damaged and has to close) or their jobs (either because they factory is damaged or the road to get there is destroyed). And it is reduced because they have lost their home and need to pay for temporary housing and to replace or repair their dwelling.

This reduction in consumption levels makes some people fall under the poverty line or the subsistence lines. In the case of the 100-year typhoon, around 176,000 people fall in poverty, and 230,000 even fall below the subsistence line.

While the losses that affect these people are small – they are poor so they cannot lose much – the effect on their well-being can be much higher than for rich individuals who have savings and can smooth the shock.

If we look at the effects of all possible hazards in all regions, we see that natural disasters have the biggest impact on poverty in the Bicol and Central Luzon regions. On average, about half a million Filipinos face transient consumption poverty every year due to their exposure to disasters.

This is an important point to remember when deciding where to invest to prevent natural disasters: the places that are the priority when looking at asset losses in pesos are different from the places that are the priority when looking at the policy impact.

 
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Disaster risk metric: time to recover

And other way of measuring the impact highlight different priorities. This figure shows how long it takes for a region to fully recover after it is affected by the 100-year typhoon. (Again, this is the typhoon that affect a region on average every 100 years, even though the time between two such hits can be very much shorter than 100 years, or very much longer.)

In addition to the Bicol region, one can see that Zamboanga Peninsula or Maguindanao would take years to recover from such a typhoon. They do not appear in the previous figure because they would not see a big increase in poverty due to the storm. But if one is concerned by how long it takes to recover, then these very poor areas also become priorities.

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Disaster risk metric: wellbeing risk

If priorities are so dependent on how we look at the problem, then what can we do in practice? Using asset losses as a measure of vulnerability tend to favor richer places. Using the poverty impacts focuses on the fate of people who are living close to the poverty level, and disregard what happens to everybody else. And using the time to recover favor very poor regions. Each of these measures are partial. Can we find a better measure that would include all these dimensions?

We created a measure of the impact of disaster on well-being. Like asset losses, the “well-being losses” are expressed in pesos. But while $1 in asset losses matter more to a poor individual than to a rich individual, $1 in well-being losses is designed to mean the same thing for poor and rich people. Also, well-being losses take into account how asset losses translate into consumption losses, and how long it takes for people to recover and rebuild.

The map of well-being losses show that the regions that suffer the most from natural disasters are Bicol and Calabarzon, because of the impact on poverty, but also the National Capital Region, because there is so much wealth that can be lost there. 


 

This risk assessment provides more insight into disaster risk in the Philippines than a traditional risk assessment. In particular, it shows how the regions identified as priorities for risk-management interventions differ depending on which risk metric is used. While a simple cost-benefit analysis based on asset losses would drive risk reduction investments toward the richest regions and areas, a focus on poverty or wellbeing rebalances the analysis and provides a different set of regional priorities.