How Natural Disasters Effect Economics

Funding for StartupsLightning can strike even in the safest place. Whether you live near a volcano, along a river that floods or in a tornado alley, there’s always a possibility of natural disaster. Once it happened, economy suffers. It might take few years to compensate of what was taken. Besides loss of life, damage to infrastructure if by far the most common effect of catastrophes. That’s why you should take precautions on your valuables. But what’s odd is that natural disasters have negative and positive effects on the local economy as well. With careful study, we are able to determine them through the following.

Insurance risks increases. Natural calamity puts pressure to the economy as well as to the insurers and policy holders. After seeing the risks brought about by disasters, insurers respond by raising insurance rates for policy holders thus making insurance more expensive. This is a detrimental effect to the economy because aside from the damage of properties caused by calamity, you are facing high rates of insurance policy.

Livelihoods are disrupted. Severe natural disasters take a toll on the economy. It affects the people’s day–to–day lives. If your office have been affected by flood, it would take few more days to go back to work again. It’s even more heartbreaking if it damaged the small store that you own. Loss of income of a shuttered business during the calamity disturbance seriously affects the company’s economy, fortunately good insurance and credit offerings like these can make the process much easier. Obviously, this is a damaging effect to the economy that no one can control.

Disasters cause damage to infrastructures. Imagine a cellular phone without signal, transportation on hold and severely damaged railways. It takes a setback on the economy. Without these factors big or small businesses will be having difficulty in continuing everyday transactions. Aside from physical structures, computer networking infrastructure can also bug down resulting to internet disruption on the affected areas. This can be a major negative problem since the global economy, foreign exchange and stock exchange works with internet capability.

Post–disaster clean – up and restoration can be the only positive gain after the strike of a natural disaster. There are specific businesses that are part of an economy sector which helps people get their lives back. It may seem odd but what’s left after the severe calamity is a profit to them. Contractors help clean the debris left behind by disaster. Tree trimmers gain from this kind of situation as well. Even car dealership can benefit from this, economy-wise. On the contrary to the unfavorable effects, the costs to reconstruct can boost the local economy even if it’s government or privately funded.

In the end, it’s hard to imagine the degree of damage that catastrophes can bring about in the economy. It does not only affect the economy of the affected area but it also has an impact on a larger scale. Natural disasters are inevitable and we can’t do something to avoid them but we can be prepared for it physically and financially. We only need to comprehend its economic implications.

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One Response

  1. MB says:

    You mean AFFECT, not EFFECT.

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