Experience of detailed assessment in ECLAC

(direct and indirect impacts) (ECLAC)

Experience of macro-economic aspects in

ECLAC (ECLAC)

Conceptual considerations

Natural HazardsNatural 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

lossesV=p(NP, HS)

RISKProbability and magnitude of damage and losses

R=f(NZ, V)

Assessment MethodologyAssessment Methodology

DamageDamageTo AssetsTo Assets

Changes in Changes in Economic FlowsEconomic Flows

ReconstructionReconstructionOf AssetsOf Assets

- Changes in Macro-- Changes in Macro-Economic PerformanceEconomic Performance- Welfare impact- Welfare impact

Financial gapFinancial gap(fiscal and(fiscal andInvestmentInvestmentPortfolio)Portfolio)

CyclonCyclone or e or

hurrichurricaneane

Sector by sector valuation Sector by sector valuation methodologymethodology

Social SectorsSocial Sectors HousingHousing HealthHealth Education, culture, sportsEducation, culture, sports

InfrastructureInfrastructure Transport and Transport and

communicationscommunications EnergyEnergy Water and sewerageWater and sewerage

Productive sectors Productive sectors Goods: agriculture, industryGoods: agriculture, industry Services: commerce, tourism, Services: commerce, tourism,

etc.etc. Global impactGlobal impact

On the environmentOn the environment Gender perspectiveGender perspective Employment and social Employment and social

conditionsconditions Macroeconomic assessmentMacroeconomic assessment

Sources of informationSources 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 HUMAN IMPACTIMPACT

VictimsVictims

HealthHealth

EducationjEducationj

NATURAL HABITAT / NATURAL HABITAT / ENVIRONMENTENVIRONMENT

-Water (quality and Water (quality and quantity, retention and quantity, retention and control)control)

-Air (pollution, clean)Air (pollution, clean)

-Biodiversity and integral Biodiversity and integral ecosystem management ecosystem management (impact at global, macro (impact at global, macro and micro systems)and micro systems)

FINANCIALFINANCIAL

- Credit accessCredit access

- Land tenureLand tenure

- Legal ownership and - Legal ownership and empowerement (differential empowerement (differential access to creditaccess to credit

PHYSICAL INFRASTRUCTUREPHYSICAL INFRASTRUCTURE

Type and quality of settlements and Type and quality of settlements and housinghousing

-Communications and transport Communications and transport infrastructureinfrastructure

-Other built infrastructure and Other built infrastructure and vulnerabilityvulnerability

SOCIAL ASPECTSSOCIAL ASPECTS

-Networks and systems (security, Networks and systems (security, safety and solidarity)safety and solidarity)

-Family units, extended linksFamily units, extended links

-Violence and securityViolence and security

Integrated systemic impactIntegrated systemic impact

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

1

10

100

HUMAN

SOCIAL

NATURAL/ENVIRONMENTALFINANCIAL

PHYSICAL

Pasado Presente Corto plazo Mediano y largo plazo

Future ScenariosFuture Scenarios 11stst. Scenario: damage assessment and event’s impact, without . Scenario: damage assessment and event’s impact, without

including reconstruction actionsincluding reconstruction actions Alternative reconstruction scenariosAlternative reconstruction scenarios

Taking into account no longer the replacement but the Taking into account no longer the replacement but the reconstruction costsreconstruction costs

Emerging reconstruction priorities, sector by sectorEmerging reconstruction priorities, sector by sector The emerging reconstruction strategies in the immediate weeks The emerging reconstruction strategies in the immediate weeks

after the disasterafter the disaster The economy’s absorption capacity of foreign resourcesThe economy’s absorption capacity of foreign resources The economy’s capacity to execute projectsThe economy’s capacity to execute projects The performance of key economic variables in the face of an The performance of key economic variables in the face of an

increase or impending reorientation of resources for increase or impending reorientation of resources for reconstruction: interest rates, indebtedness, inputs and production reconstruction: interest rates, indebtedness, inputs and production means availability (raw materials, capital goods, domestic saving, means availability (raw materials, capital goods, domestic saving, labour force, etc.)labour force, etc.)

The situation after the disasterThe 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

Crecimiento del PIB en Honduras

- 2.0

- 1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1996 1997 1998 1999 2000 2001 2002 2003 2004

Tasa de crecimiento sin Mitch ni sequìa Crecimiento con Mitch y sequía

MITCH

SEQUIA

Evolución del PIB en El Salvador

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1996 1997 1998 1999 2000 2001 2002 2003 2004

Tasa de crecimiento sin Mitch, terremotos ni sequía

Crecimiento con Mitch y terremotos

MITCH

TERREMOTO

SEQUIA

Evolución del PIB en Nicaragua

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

1996 1997 1998 1999 2000 2001 2002 2003 2004

Tasa de crecimiento sin Mitch ni sequìa Crecimiento con Mitch y sequía

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

Thank you for your attention.Thank you for your attention.