Cost of Typhoon Yagi impact laid bare in wide-ranging study

The United Nations Development Programme (UNDP) last week released a multi-sectoral assessment for recovery from Typhoon Yagi.

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Results showed that Typhoon Yagi has dented a significant adverse impact on Vietnam’s economy, which varies markedly by sector and provinces. Among the affected 26 provinces, 11 provinces were significantly knocked in terms of economic damage and loss.

Overall damage is estimated at nearly $1.5 billion, which is approximately 0.62 per cent of the 2023 GDP. Total losses are estimated at more than $1.77 billion, equivalent to 0.74 per cent of the 2023 GDP.

This is higher than the rough estimates made by the Ministry of Planning and Investment right after the natural disaster happened in September. The ministry had revealed that Yagi had caused economic losses of about 0.15 per cent of GDP, equivalent to $1.66 billion.

For the whole year, growth was expected to reduce by 0.33 per cent in the agro-forestry-fishery sector, 0.05 per cent in the industrial and construction sector, and 0.22 per cent in the services sector.

However, according to the assessment, in terms of direct economic loss, the service sector – mainly culture and tourism – incurred the largest loss, estimated at $310 million. The agriculture sector suffered a loss of $226 million, while the industry incurred a loss of $96 million.

“Typhoon Yagi reduced production outputs across economic sectors, resulting in a significant loss in GDP and an adverse impact on employment and livelihoods. The service sector accounted for the largest output loss,” stated Nguyen Hoang Hiep, Deputy Minister of Agriculture and Rural Development.

The service sector’s net output loss is estimated at $323 million, which is approximately 0.14 per cent of the 2023 GDP. That shaved off 0.31 percentage points from its baseline growth rate, forecasted at 6.6 per cent.

The agriculture sector incurred a net output loss of $160 million. That chipped away 0.62 percentage points from its baseline growth rate. The agricultural output loss is equivalent to 0.07 per cent of the 2023 GDP.

Meanwhile, the industrial sector was least affected by the Typhoon Yagi, although several industrial parks were hit severely. “The net industrial output loss is estimated at $83 million, reducing its growth rate by 0.1 percentage points compared to the baseline forecasted at 7.3 per cent,” said the assessment.

According to the UNDP, the direct adverse impact on GDP growth could be partially offset by fiscal and social protection measures undertaken by the government. The cash transfer scheme and humanitarian relief were rolled out to support the most affected households, mainly vulnerable people including women, children and older persons. Moreover, temporary tax exemptions have also been introduced.

In addition, the storm is estimated to have had a certain effect on the external trade balance. Vietnam’s exports are estimated to decrease by $502 million for the year, which is tantamount to 0.21 per cent of 2023 GDP. The effect on the imports is estimated to be minimal. As such, the trade balance impact is not anticipated to have any catastrophic effect on the current account balance and the balance of payment.

According to the General Department of Vietnam Customs, from January to December 14, Vietnam’s goods export and import turnover is estimated to have come in at $745.4 billion, up 15.35 per cent on-year. The figure is expected by the government to hit more than $782 billion for the entire year.

The UNDP assessment also pointed out that the government’s fiscal space was also affected by the typhoon. Estimation of government revenue loss has proven difficult due to limited primary data on the number of the affected enterprises and the introduction of numerous tax exemptions for affected enterprises. Government revenue is estimated to decrease by $88 million, which is equivalent to 0.04 per cent of GDP in 2023.

The reduced government revenue is driven mainly by lower corporate tax revenue and import export duties due to lower economic activity.

As the most devastating storm to affect Vietnam in 30 years, Typhoon Yagi affected 3.6 million people in nearly half of the country’s provinces, exacerbating vulnerabilities in communities already at risk from climate-related disasters.

The typhoon, floods, and landslides led to the deaths of 307 people and injured over 1,900 people. Throughout the country, as many as 240,600 homes, 1,530 schools, and 570 health facilities were seriously damaged, with another 73,250 homes submerged in floodwaters. An estimated 72,600 people still require shelter after their homes were destroyed or severely damaged.

“Overcrowded and under-resourced evacuation centres pose protection risks, particularly for women and children, who face heightened threats of gender-based violence and communicable diseases,” said Deputy Minister Hiep. “Households classified as poor and near poor, even before the successive floods, lack the resources for materials to repair their homes.”

Aimed to assess the full extent of the impact of the typhoon and propose appropriate recommendations for sustainable recovery across all affected sectors, the UNDP assessment was conducted alongside the Ministry of Agriculture and Rural Development, through the Vietnam Disaster and Dyke Management Authority, which took the lead in coordinating with other ministries, agencies, United Nations agencies, the European Union, and other development partners.

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