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Pacific island countries are highly vulnerable to destructive and unpredictable disasters. This paper identifies the intensity of disasters for each country in the Pacific based on the distribution of economic damages and population affected by disasters, and estimates the impact of disasters on economic growth and international trade using a panel regression method. The results show that ‘severe’ disasters have a negative and significant impact on economic growth and lead to a deterioration of the trade balance. Going further, this paper proposes a simple and consistent approach to incorporate disaster risks for economic planning. Better incorporating the economic impact of disasters in the medium- and long-term economic planning would help policy-makers improve policy decisions and to be better prepared for disasters.

The economic impact of disasters in Pacific island countries: estimation and application to economic planning