IMF Working Papers Volume 2025 Issue 084: Impact Dynamics of Natural Disasters and the Case of Pacific Island Countries (2025)

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

Author:

Choonsung Lim

Choonsung Lim
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and

Yue Zhou

Yue Zhou
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Series:: IMF Working Papers

Volume/Issue:: Volume 2025: Issue 084

Language:: English

Publication Date:: 02 May 2025

DOI:: https://doi.org/10.5089/9798229008518.001

ISBN:: 9798229008518

ISSN:: 1018-5941

Pages:: 34

Keywords:: Climate change; natural disasters; growth; development; nightlight; IMF staff calculation; Choonsung lim; impact dynamics; nightlight data; IMF working paper 25/84; Fiscal stance; Pacific Islands; Global

Legal-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.

Series:: IMF Working Papers

Volume/Issue:: Volume 2025: Issue 084

Language:: English

Publication Date:: 02 May 2025

DOI:: https://doi.org/10.5089/9798229008518.001

ISBN:: 9798229008518

ISSN:: 1018-5941

Pages:: 34

Keywords:: Climate change; natural disasters; growth; development; nightlight; IMF staff calculation; Choonsung lim; impact dynamics; nightlight data; IMF working paper 25/84; Fiscal stance; Pacific Islands; Global

Legal-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.

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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

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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