Enhancing Macroeconomic Resilience to Natural Disasters and Climate Change in the Small States of the Pacific

Natural disasters and climate change are interrelated macro-critical issues affecting allPacific small states to varying degrees. In addition to their devastating human costs, theseevents damage growth prospects and worsen countries' fiscal positions. This is the firstcross-country IMF study assessing the impact of natural disasters on growth in the Pacificislands as a group. A panel VAR analysis suggests that, for damage and losses equivalent to1 percent of GDP, growth drops by 0.7 percentage point in the year of the disaster. We alsofind that, during 1980-2014, trend growth was 0.7 percentage point lower than it would havebeen without natural disasters. The paper also discusses a multi-pillar framework to enhanceresilience to natural disasters at the national, regional, and multilateral levels and theimportance of enhancing countries' risk-management capacities. It highlights how thisapproach can provide a more strategic and less ad hoc framework for strengthening both exante and ex post resilience and what role the IMF can play.