Are the Economic Cost of Disasters Decreasing?
In a somewhat surprising turn of events, a recent data analysis suggests that the economic cost of disasters has actually declined, as a percent of global gross domestic product, over the past 3 decades. For those of us in the emergency preparedness field, this seems counterintuitive, so let’s explore!
Analysis of the Decline in the Economic Cost of Disasters
Okay, one thing we need to keep in mind is that the data I’m about to share looks at the economic cost of disasters on a percentage basis. It’s not the raw cost, it’s the percent of costs relative to global GDP. The raw costs are obviously increasing, but global GDP is growing at a higher rate, which reduces the percentage.
As an example, if you earn $100k a year and your expenses are $50k a year, your expenses represent 50% of your income. If your salary increases to $150k per year and your expenses grow to $60k a year, your expenses represent 40% of your income. So in this example, even though you have higher raw expenses, since your income grew at a higher rate, the percentage is lower.
The analysis I’m describing is from a Forbes article that collected data on the economic cost of disasters from multiple sources, including the World Bank and 2 global insurance firms. It’s a great analysis and the details can be found here.
At a high level, the analysis finds that disaster-related economic costs have declined from 0.3% of global GDP in 1990 to 0.25% in 2019. Again, click on the link to the Forbes article above for the complete data set along with a graphical representation of the trend.
Globally speaking, this is great news, but keep in mind that the historical trends are not necessarily going to hold true in the future. It also may be more of an indictor of the growth of global GDP than the economic cost of disasters. Still, it’s refreshing to see that, at least on a percentage basis, things are trending in the right direction!
