We've been underestimating the costs of natural disasters by up to 60%, according to a World Bank study

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MARRAKESH, Morocco (Thomson Reuters Foundation) - Natural disasters have a more devastating impact on the poor than widely thought, forcing some 26 million people into poverty each year and setting back global spending on goods and services by the equivalent of $520 billion annually, the World Bank said on Monday.

The human and economic costs of disasters, caused by extreme weather and earthquakes, have been underestimated by up to 60 percent because they ignore the high toll on the consumption and related well-being of the poor, the bank said in a new study.

“Severe climate shocks threaten to roll back decades of progress against poverty,” said World Bank Group President Jim Yong Kim in a statement. "Building resilience to disasters not only makes economic sense, it is a moral imperative.”

Stephane Hallegatte, lead author of the report, said poor people tend to suffer more from disasters as they often live in places that are hit more often, and lose a bigger share of their income. They also receive less support from governments, friends and family, he added.

The report notes that a flood or earthquake can be disastrous for poor people but have a negligible impact on a country's overall wealth or production if it affects people who own almost nothing and have very low incomes.

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But for them, disasters can have damaging long-term effects, such as forcing families to take a child out of school or to spend less on healthcare, it adds.

Among Guatemalan households hit by tropical storm Agatha in 2010, per capita consumption fell 5.5 percent, hiking poverty by 14 percent, according to research cited by the bank.

"Dealing with climate change and natural disasters and resilience is an important component of poverty reduction policy," Hallegatte told the Thomson Reuters Foundation.

If the value of assets threatened by disasters is the main factor in planning how to reduce risks, the majority of support will go to better-off countries and communities, he said.

The aim of the report — produced in response to demand from governments — is to help states balance protecting financial returns with taking care of the poor.

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The World Bank plans to use the findings to steer policy discussions with countries on managing risks across the board.

The research could also guide countries on putting into practice their climate change action plans, submitted for the Paris Agreement that took effect on Nov. 4, Hallegatte said.

"If we select priorities based on our measure of the impact of natural disasters on well-being, we will be able to spend not only efficiently but also help the poorest," he said.

Good for prosperity

The study, produced with the Global Facility for Disaster Reduction and Recovery (GFDRR), uses a new method of measuring damages that factors in the unequal burden of disasters.

It also calculates that measures to help the poor withstand shocks could save countries and communities $100 billion a year and cut the impact of disasters on well-being by a fifth.  

Those measures include creating early warning systems and giving wider access to personal banking, as well as insurance policies and social protection systems such as cash transfers and public works programs.

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The report gives a breakdown of the potential well-being gains for each of the 117 countries analyzed, including rich and poor nations, and suggests that it is not only the less well-off who could benefit from changes.

The United States, for instance, is classed as having lower socio-economic resilience to disasters - the ability of an economy to limit the effect of asset losses on well-being - than the Philippines. It stands to make gains of nearly $8 billion per year from investing in efforts to boost resilience, the report says.

Hallegatte, a lead economist with the GFDRR, said it was not yet possible to put a price on the measures required because they would differ from place to place, and in many cases the costs would be shared between states and other funding sources.

But it was in the interests of society to invest in boosting the resilience of the poor to disasters because it would cost less than bailing people out and rebuilding afterwards, he said.

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For example, social protection systems in Kenya and Uganda provided resources to vulnerable farmers well before drought hit in 2015, saving lives and cutting spending on emergency aid compared with similar droughts a decade ago, he said. 

"If you have social protection systems... taxpayers will be the winners in the end because it is less costly than waiting for the catastrophe to happen," he said.

"There is a very selfish argument for reducing poverty, because it is just good for the prosperity of your country."

(Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit http://news.trust.org)

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