Assessment of the Impact of Natural Disasters

Current Practice

D.M. Rupasinghe Senior Economist

Central Bank of Sri Lanka

What are the common natural disasters in Sri Lanka ?

(a) Droughts (b) Floods(c) Landslides/earthslips(d) Cyclonic winds - followed by torrential

rains

Why Assesses Damages?

Impact on the livelihood of the communityTo quantify the lossesTo quantify the rehabilitation and reconstruction cost. To measure the macroeconomic impactEnvironmental impactTo identify required relief measuresTo provide details to donor

Areas of Macroeconomic Impact

Real sector

External sector

Fiscal sector

Monetary sector

Prices

Employment

Reporting Procedure

Part I : Introduction

Part II : Evaluation of the impact on

property, economic activity and prices.

Part III : Brief account of relief

measures and donor

assistance

Evaluation of the impact on property, economic activity and prices (focusing floods).

Impact on Human life Death

Number Missing

Injured

Displaced

1. Impact on Private and Public property

(a) Private property houses, business centres, factories, bank branches etc.

(b) Public property schools, medical institutions, post offices, and other government buildings.

(2) Economic Infrastructure ;

Energy - electricity, petroleum

Communication

Transport : Roads, bridges, rail

roads and transport equipments

Irrigation facilities

(3) Health, education and other social InfrastructureHealth:

Equipmentstock damage(b) Cost on disease control (c)Water and Sanitation

Education : Use schools for displaced families damages to the other facilities Cost of re-opening

Relief payments

(4) Impact on Economic Activities

4.1 Agricultural Sector Agriculture, forestry

and fishing Paddy Tea

Rubber Other field crops Livestock Fishing

4.2 Impact on the Industrial Sector

• Mining and quarrying (Gem mining )

• Manufacturing Processing of plantation

crops Factory industry

Small industry

4.3 Construction Reconstruction of roads, building and other infrastructure.

4.4 Impact on the services sector

Electricity, water and gas

Electricity - Loss of electricity supply

Water - Decline of water production

Petroleum- Drop of Sales

Transport, storage and communication services

- Interruption to transport services

- Interruption to communication services

- Port services

Banking, insurance and real estate

- Impact on banking service

- Possible credit loss

- Impact on insurance industry

Impact on prices

(a) Due to loss of production

(b) Disruption to distribution network

(c) Demand pressure

(d) Disturbances to Market operations

(6) Impact on Balance of Payment Exports, imports and services

Foreign financial assistance

(7) Government Finance Impact on government expenditure

a) Emergency Relief b) Rehabilitation and

resettlement cost c) Reconstruction cost

Impact on government revenue

a) Impact on tax revenue loss of economic activities, change in consumption, exemption of import duties etc.

What is not covered ?

Indirect losses (Possible to quantify) a) High operational cost due to

destruction to physical infrastructure and inventories

b) Diminished productivity in other sectors due to the total or partial paralysis of activities.

c) Additional cost on alternative means of production.

d) Cost on budgetary re-alignment.e) Income reduction due to non-

availability of public utilities f) Cost incurred by third parties

involved in attending affected people

g) Additional cost on dealing with the new situation

h) Loss of production due to backward and forward linkages

Indirect Losses (Impossible to quantify)

a) Certain Environmental impact b) Social impactc) Impact on well being and quality of

lifed) Certain opportunity costse) Quality of services providersf) Loss of productivityg) Change of development priorities

Report on the Impact of Floods in May 2003

 Summary

1.Introduction Torrential rains commencing on 16 May,

coupled with the cyclonic winds, resulted in heavy flooding and landslides in various parts of the country, the worst-ever since 1947, with an extreme impact on the districts of Ratnapura, Matara, Galle, Kalutara and Hambantota.

2. Damages This resulted in a severe damage to

both human and physical capital in the country. Provisional estimates show a loss of output of about Rs.2.5 billion at 1996 prices (0.27 per cent of GDP), i.e., about 0.3 percentage points decline in GDP growth for 2003, with hardly any impact on consumer prices in May 2003.

The biggest damage was to human life, with the death toll amounting to 265, and about 500 people believed to be missing. About 188,000 families have been displaced in the five districts.

3. Social and economic infrastructure

Social and economic infrastructure has been devastated with heavy damage to schools, power distribution, telecommunication network, and transport facilities. Overall health conditions in the districts could deteriorate due to the non availability of clean water and sanitary facilities, causing epidemics. However, physical infrastructure such as roads, electricity and telecommunication facilities are being restored expeditiously.

4. Economic ActivitiesThe adverse impact on economic activity in those districts, as well as in the rest of the country, is estimated to require a downward adjustment in the GDP growth rate from 5.5 per cent to about 5.2 per cent. The worst hit sectors are agriculture, industry and some services. Exports will have a marginal negative impact, and the import requirement will increase.

Agriculture

The Agriculture sector is likely to show an overall decline of 0.9 percentage points mainly due to the decline in the production of tea, rubber, paddy and other field crops. The overall contribution to the decline in GDP growth from agriculture is around 57 per cent.

Industrial Sector 

The Industrial sector accounts for about 16 per cent of the decline. The impact on the industrial sector is seen mainly in gem mining and processing of tea and rubber. Gem mining will show a serious decline, contributing about 32 per cent of the overall change in GDP. Factory industry is unlikely to show any significant impact, as factories located in the flooded areas have not seriously been affected.

Service Sector 

The contribution of the services sector to the overall decline in GDP growth will be around 27 per cent, with telecommunications, transport, exports, internal trade and banking services showing a decline, while imports show an improvement. The Construction is also likely to grow by an extra 1.5 percentage points, compensating about 36 per cent of the reduction in GDP growth.

5. Prices 

The impact on overall prices, in May, thus far, appears to be minimal in the main markets outside the flood affected areas. Prices in June may rise more than the seasonal increase. However, with the positive impact of overall price declines in the early part of the year and anticipated favourable fuel prices, annual inflation may remain within the earlier estimate of 7.5 per cent for 2003.

 

6. Unemployment 

Damage to physical property and infrastructure may increase unemployment. But, the rapid rebuilding work may increase labour absorption and unemployment would only be a short-term problem.

7. Balance of Payment 

The Overall Balance of Payments situation may not change adversely, though there could be an increase in trade gap. Aid inflows may effectively compensate a large part of this increase.

 

8. Fiscal expenditure 

Fiscal expenditure will rise mainly due to the provision of social services, and restoration of other social, economic and physical infrastructure, over and above the aid received. Government revenue will be affected along with the reduction in economic activity. The overall impact on the budget deficit will be limited as part of additional expenditures is expected to be covered with additional foreign assistance.

Thank you.