Super Typhoon Yolanda’s devastating assault on the central Philippines exerted a catastrophic human cost, but analysts say its impact on one of Asia’s fastest growing economies will be less traumatic.
The national economy has been on an upswing for the past five years and expanded 7.6 percent in the first half of 2013 — a remarkable turnaround for a country once seen as an irredeemable non-achiever.
The government targeted gross domestic product (GDP) growth of between 6.0 and 7.0 percent for the whole year, and now the question is whether that needs to be re-calibrated in the wake of the typhoon damage.
The Philippines is no stranger to natural disasters, but Haiyan was in a class of its own, packing some of the strongest winds ever recorded by a storm making landfall.
More than 4,000 people were killed and up to 4.4 million displaced — twice the number that lost their homes after the 2008 Indian Ocean tsunami.
According to the International Labour Organization, around five million workers — equivalent to the population of Norway — had their livelihoods temporarily or permanently destroyed.
Risk modelling specialists such as AIR Worldwide have forecast the total economic loss at anywhere between $6.5 billion and $15 billion dollars.
But as grim as those statistics are, the macro economic cost of Yolanda will, according to initial estimates from various sources, be lighter than might have been expected from a storm of such destructive power.
The typhoon barrelled through some of the poorest regions in the country, sparing any significant manufacturing base and largely impacting agricultural areas producing rice and coconut.
“The affected areas account for a relatively small proportion of GDP, so the impact on headline GDP is likely to be small and manageable,” Credit Suisse said in a report that questioned forecasts suggesting Haiyan would shave one percentage point off the 2013 annual growth rate.
“Exports of agricultural products will be impacted, but they form a relatively small portion of overall exports,” the report said.
There is some concern over a spike in inflation triggered by higher rice prices, but most estimates predict it would be short-lived, especially if enough rice seed is provided for the crucial December-January planting season.
The Bangko Sentral ng Pilipinas has indicated it would consider tweaking monetary policy if the typhoon’s inflationary legacy persists, but said economic growth goals for the year were still achievable.
“Our own runs (projections) show that 2013 GDP growth could still be within the government’s target range, as rehabilitation efforts could make up for lost production,” bank governor Amando Tentangco told the Wall Street Journal.
Economists such as Ronald Mendoza, executive director at the Asian Institute of Management in Manila, believe the reconstruction effort could prove to be the silver lining in the typhoon story.
“There is a real opportunity here to encourage inclusive growth in a historically impoverished region that has been largely disconnected from those elements driving the national economy,” Mendoza said.
“An ambitious rebuilding program would not just be good for the region. It would also send an important message to foreign investors about the country’s resilience and its ability to bounce back from crisis,” he added.
The Philippines reached an important milestone this year as, one after the other, the three global rating agencies granted the country investment-grade status.
The move reflected higher growth, political stability and improved governance — all of which have stimulated the interest of overseas investors.
The Credit Suisse report said the post-Haiyan reconstruction effort would boost GDP in 2014, and it also forecast a short-term shot in the arm for the country’s current account delivered by a spike in overseas remittances.
The amount of money Filipinos living abroad send home every year is equivalent to 10 percent of GDP and previous disasters have traditionally seen a sharp jump of up to 15 percent in the size of the remittances.
But even the best-case economic scenario envisages a long, grim struggle for the millions of traumatised victims of Haiyan, for whom silver linings offer little immediate relief.
“Beyond the estimates of damage and reconstruction, it is important to consider the intangible losses,” said Danilo Israel, senior research fellow at the Philippine Institute for Developmental Studies.
“The loss in human lives, the loss of bio-diversity, the destruction of heritage sites, the loss of relationships — it’s difficult to put a value on these intangibles, which can sometimes have a big impact on economic growth.”