Economic risk reduction

The higher temperatures, droughts, floods and natural disasters that may result from climate change can be expected to exacerbate economic insecurity in developing regions, with the world’s poorest nations most at risk. Lack of resources increases vulnerability to climate shocks, while the conditions that enable societies to cope – such as social safety nets and unemployment insurance – are largely absent in low-income countries. Under such conditions, unpredictable climate patterns may even cause poverty by discouraging domestic and foreign investment.

Ultimately, the economic costs and losses of climate change can prevent countries from reaching the internationally agreed development goals, including the Millennium Development Goals. Natural disasters are known to have a significantly negative impact on the macroeconomic health of poor countries, manifested in fiscal imbalance, economic stagnation, and deteriorating balances of payments. The economic cost of droughts and floods, including compensation for lost land, may also polarize society and marginalize communities, increasing the risk of conflict.

Addressing current vulnerabilities is necessary to enhance resilience to future effects of climate change. In the event of a natural disaster, for example, vulnerable countries all too often keep focused on disaster recovery instead of economic development. Yet economic growth is critical to reducing vulnerability. More resources mean greater access to technology, alternative means of making a living and protection from extreme weather events. Resilience is about maintaining the delivery of vital services and resources into the long term, even while adapting to shocks and complex change.

Through its analytical work on economic projections and socioeconomic conditions, DESA provides insight into how to overcome economic risk, create employment and promote inclusive development. The 2008 edition of the World Economic and Social Survey, now in preparation, will shed light on the mechanisms that allow nations and individuals to mitigate the adverse effects of economic insecurity by reducing the vulnerability to economic shocks, natural disasters, ill health and conflict.


Case studies