The late-arriving storms of the Northeast monsoon caused havoc across South and Southeast Asia during the past two weeks leading to one of the hardest-hit natural disasters faced by the region in the recent past. The number of casualties and affected are rising by the day alongside severe damages to property and infrastructure leaving countries in a state of a major crisis. Cyclones ‘Ditwah’ and ‘Senya’ hit Sri Lanka and Indonesia respectively while Typhoon ‘Koto’ caused severe flash floods and landslides in the Philippines before moving towards Thailand and Vietnam. The officially reported death toll has reached 1,750+ across the region while millions have been displaced and thousands are still missing.
Warning signs and risk cautions have always pointed towards the same direction but the lack of urgency to implement the much-needed climate reforms continue to cause further damage as years go by. A UN report that was released earlier this year cautioned that climate-related disasters could cause annual economic losses of 6% or more in about one-third of Asia-Pacific nations, highlighting how exposed the region is to climate risks. Asia in particular face an increasing risk given that the region is warming twice as much as the global average and shows no signs of stopping, putting livelihoods in real danger.
What caused this series of catastrophes?
Experts claim that an unusual mix of extreme weather patterns coupled with long overdue consequences of man-made actions have resulted in the devastation. While monsoonal rains are expected during this time of the year, the sheer volume of rainfall that lasted within a span of 5-6 days was beyond manageable.
A big part of the increasing rainfall is attributed to the region’s warming atmosphere and oceans. A natural climate pattern ‘La Nina’ - where cooler waters in the eastern Pacific and warmer waters in the west boost winds that push heat and moisture toward Asia – was one reason for the extra that created the conditions for storms to form. What’s unusual this time however, is the placements of where the storms were taken place. Storms don’t usually form near the Equator due to weak force, but Cyclone Senyar still developed around 5 degrees north, in the strait between Indonesia and Malaysia.
Along with global warming, human action in the region over the years have largely contributed for the disasters as well. Indonesia is concerned about illegal logging, mining and massive deforestation that may have contributed to the crisis. Since 2000, the flood-inundated Indonesian provinces of Aceh, North Sumatra and West Sumatra have lost 19,600 square kilometres of forest. Likewise in the Philippines, hundreds of thousands have marched in protest against corruption tied to flood control projects. Similar, if not worse conditions prevail in other countries of the region as well that clearly explains the ‘man-made’ side of these ‘natural disasters’.
How is it affecting the region’s economy?
While the full damage of the crisis is still unclear, it is estimated that the damage so far has caused at least USD 20 Billion since late November. As a region depending heavily on exports and tourism, this level of damage is expected to cause a massive setback at least in the short term.
The obvious sector to take a major hit from the disaster would be Agriculture. Price hikes that are already taking place could push inflation upward thereby reducing the purchasing power of consumers further damaging economies that are already battling weak consumption. Damages to internal roads and bridges alongside large scale destruction to cultivation lands could cause supply disruptions risking a considerable slowdown of agriculture output. Manufacturing bases that were hit could face major delays in meeting export demand and damaged caused to factories could hinder industrial output considerably as well. The revival of tourism will be an uphill task given the sheer scale of damage to tourist destinations and how widespread the floods and landslides have been across all these countries.
A large fiscal outlay is expected to be seen across countries for disaster relief and re-construction of essential infrastructure. Countries such as Thailand and Indonesia who have already committed billions before November storms to spur economic growth could face the risk of straining state-finances. A slowdown in growth and a re-allocation of state funding could disrupt the trajectory these economies were consequently impacting investor confidence and capital flows that looked promising not too long ago.
While climate change alone may not be the reason for any economic slowdown experienced, the recent catastrophes show the scale of damage it could cause if left unattended. Disasters such these that are becoming increasing visible especially across the Asian region and are leaving a lasting mark as they come about every now and then, calls the urgent need for reforms and serious consideration of aligning countries’ economic policies with climate friendly principles.
What does this mean for Sri Lanka?
The economic impact of the disaster outside of the clearly visible areas such as agriculture production, internal transport disruptions, fiscal spending still remain unclear. Multilateral flows can be expected from international organizations in addition to the request made by the government to the IMF for USD 200 Million as a Rapid Financing Instrument (RFI) which is under review. While considerable relief assistance spending take effect, given the fiscal space and multilateral support the government has, it is clear that Sri Lanka is able to continue on its recovery path without a major strain for state finances. While it is still too early to predict effect of the disaster on consumer prices, inflation and credit, we will continue to monitor how these aspects are affected as time progresses.