Event

Typhoon Haiyan, the Philippines’ worst natural disaster ever, has devastated villages and cities from Eastern Visayas in the center of the Philippine archipelago. About 10 million people (i.e. 10% of population) have been affected. Thousands of dead have been reported.

Impact on country risk

Although the Philippines is prone to natural disasters, the latest typhoon has been terribly devastating. In light of climate change, this might herald a higher severity of natural disasters hitting the country in the future, meaning that raising investments in mitigation and adaptation plans will be crucial to limit the future human and economic cost. Meanwhile, besides the human tragedy, the economic impact is likely to be limited as Visayas region only accounts for 12% of domestic GDP - agriculture and infrastructure are the most heavily affected sectors. In one of the most performing economies in Asia, economic expansion is expected to be slightly revised downward this year (still around 7% though) before potentially rising to higher levels in 2014. Particular support will indeed come from substantial external aid, reconstruction spending (a plan is soon to be presented) and robust Filipino workers’ remittances. The Philippines’ strong fundamentals and resilience to shocks will therefore leave the country risk classifications unchanged despite the typhoon Haiyan episode.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com