IMF Working Papers

Impact Dynamics of Natural Disasters and the Case of Pacific Island Countries

By Choonsung Lim, Yue Zhou

May 2, 2025

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Format: Chicago

Choonsung Lim, and Yue Zhou. "Impact Dynamics of Natural Disasters and the Case of Pacific Island Countries", IMF Working Papers 2025, 084 (2025), accessed May 11, 2025, https://doi.org/10.5089/9798229008518.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper investigates the short- and medium-term economic impacts of natural disasters, focusing on Pacific Island Countries (PICs) and using global high-frequency nightlight data in addition to macroeconomic data. In this paper, we identify significant short-term effects on growth following natural disasters, which are exacerbated by high public debt and heightened climate vulnerability. Although the negative impacts generally diminish within a year for most countries, PICs face disproportionately larger and rising short-term disruptions (-1.4 percent of annual potential growth) and persistent medium-term consequences. Further analysis of PICs' fiscal, external, and real sectors following severe disasters using annual economic data reveals that weaker fiscal positions, partly driven by reduced output, may lead to an upward trend in public debt, and increased imports may deteriorate current account balances over the medium term. These findings underscore the need for robust counter-cyclical policies and proactive investments in climate resilience to mitigate the adverse effects of climate shocks and promote long-term economic stability

Subject: Environment, Natural disasters

Keywords: Climate change, Development, Growth, Natural disasters, Natural disasters, Nightlight, Pacific Islands

Publication Details

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