Macro-Economic Impact

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Oct 28, 2013 (3 years and 8 months ago)

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6/11/2010
1
MacroMacro--Economic Impact of DisastersEconomic Impact of Disasters
Application of the ECLAC Methodology
Application of the ECLAC Methodology
GFDRR
GFDRR
Contents
Contents

• Typical macro
Typical macro--economic impacts arising from economic impacts arising from
disastersdisasters
•• Procedures to estimate macro
Procedures to estimate macro--economic economic
i t f di t
i t f di t
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i
mpac
t
o
f

di
sas
t
ers
i
mpac
t
o
f

di
sas
t
ers
•• Example of macro
Example of macro--economic impact analysiseconomic impact analysis
What the ECLAC Methodology Does
What the ECLAC Methodology Does
•• Estimate the gaps in output, growth and
Estimate the gaps in output, growth and
development arising from the disaster, as development arising from the disaster, as
compared to noncompared to non--disaster conditions, that disaster conditions, that
would occur if no interventions for would occur if no interventions for
d t ti
d t ti
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recovery an
d
recons
t
ruc
ti
on were recovery an
d
recons
t
ruc
ti
on were
implementedimplemented
•• Enables the design and adoption of
Enables the design and adoption of
measures and interventions of recovery measures and interventions of recovery
and reconstruction to close such gapsand reconstruction to close such gaps
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Typical Impacts on Typical Impacts on
MacroMacro--Economic VariablesEconomic Variables
Gross Domestic Product
Gross Domestic Product
Balance of PaymentsBalance of Payments
Fiscal SectorFiscal Sector
Typical Impacts on GDP
Typical Impacts on GDP
Depending on type and severity of disasters, the
Depending on type and severity of disasters, the
following impacts can be expected to occur in following impacts can be expected to occur in
the year of the disaster and the subsequent the year of the disaster and the subsequent
yearsyears
•• A decline in productive sector GDP due to
A decline in productive sector GDP due to
l t i d
l t i d
(if i t ti )
(if i t ti )
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l
osses sus
t
a
i
ne
dl
osses sus
t
a
i
ne
d
(if
no
i
n
t
erven
ti
ons occur
)(if
no
i
n
t
erven
ti
ons occur
)

• A recovery of productive sector GDP resulting
A recovery of productive sector GDP resulting
from implementation from implementation of of economic recovery economic recovery
interventionsinterventions
•• An increase in construction sector GDP arising
An increase in construction sector GDP arising
from the implementation of reconstruction from the implementation of reconstruction
programprogram
Possible decline in GDP growth
Possible decline in GDP growth
Typical Impact on Balance of Payments
Typical Impact on Balance of Payments
Depending on severity and duration of disaster Depending on severity and duration of disaster
effects (damage and losses)effects (damage and losses)
•• Increase in imports (of foodstuffs and other
Increase in imports (of foodstuffs and other
products) to compensate for losses of domestic products) to compensate for losses of domestic
productionproduction
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• Increase in imports of equipment and materials
Increase in imports of equipment and materials
for reconstruction programfor reconstruction program
•• Decrease in traditional exports due to losses in
Decrease in traditional exports due to losses in
domestic productiondomestic production
•• An increase in foreign exchange income from
An increase in foreign exchange income from
proceeds of insurance and reinsurance of proceeds of insurance and reinsurance of
damaged assets and productiondamaged assets and production
Possible increase in BOP deficit
Possible increase in BOP deficit
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Typical impact on fiscal budgetTypical impact on fiscal budget
Depending on type and severity of disaster
Depending on type and severity of disaster
characteristicscharacteristics
•• Increase in current government spending to
Increase in current government spending to
meet humanitarian assistance needsmeet humanitarian assistance needs


Decreaseofgovernment tax revenues dueto
Decreaseofgovernment tax revenues dueto
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Decrease

of

government

tax

revenues

due

to

Decrease

of

government

tax

revenues

due

to

lower economic activitylower economic activity
•• The same
The same –– increase in operational costs and increase in operational costs and
decrease of revenues decrease of revenues –– for the case of for the case of
governmentgovernment--owned and operated enterprisesowned and operated enterprises
Possible increase in Fiscal deficit
Possible increase in Fiscal deficit
Procedure for
Procedure for
MacroMacro--Economic Impact AnalysisEconomic Impact Analysis
Baseline for Analysis
Baseline for Analysis
Obtain from proper authorities the following
Obtain from proper authorities the following
informationinformation
1.1.Time series of past performance of
Time series of past performance of

– GDP
GDP
Balance of Pa ments
Balance of Pa ments
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Balance

of

Pa
y
mentsBalance

of

Pa
y
ments

– Fiscal Budget
Fiscal Budget
–– Inflation
Inflation
2.
2.Forecast of performance for current and
Forecast of performance for current and
future years for same variables, future years for same variables,
developed before the disaster occurreddeveloped before the disaster occurred
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Develop postDevelop post--disaster forecast disaster forecast
of macroof macro--economic performanceeconomic performance
For analysis of
For analysis of GDPGDP
(
(by stages
by stages)
)
1.1.Using latest pre
Using latest pre--disaster projection on GDP disaster projection on GDP
performance for the current year (and subsequent performance for the current year (and subsequent
years where disaster effects are still to be felt)years where disaster effects are still to be felt)
2.2.Superimpose estimated
Superimpose estimated losseslosses
, as estimated in sector
, as estimated in sector--
b
y
b
y
--sector assessment
,
ensurin
g
no du
p
licationssector assessment
,
ensurin
g
no du
p
lications
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y
y
,g p
,g p
3.
3.Superimpose the positive effects of economic recovery
Superimpose the positive effects of economic recovery
and reconstruction programs, taking into consideration and reconstruction programs, taking into consideration
all possible delays in executionall possible delays in execution
4.4.Estimate the post
Estimate the post--disaster value and growth rate of disaster value and growth rate of
overall and sectorial GDPoverall and sectorial GDP
5.5.Compare these results with the pre
Compare these results with the pre-- or nonor non--disaster disaster
forecasts, to ascertain the impact of the disaster on forecasts, to ascertain the impact of the disaster on
economic performanceeconomic performance
Superposing Losses, Economic Recovery
Superposing Losses, Economic Recovery
and Reconstruction Effects on GDP Growthand Reconstruction Effects on GDP Growth
5.5
6
o
wth, %
GrowthGrowth
GapGap
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4
4.5
5
-2 -1 0 1 2 3
Annual GDP Gr
o
Some CommentsSome Comments

• Degree of economic growth after disaster varies
Degree of economic growth after disaster varies
depending on the effectiveness and opportunity of depending on the effectiveness and opportunity of
economic recovery program and on the intensity and economic recovery program and on the intensity and
magnitude of reconstruction investmentsmagnitude of reconstruction investments
•• While it is possible that recovery and reconstruction
While it is possible that recovery and reconstruction
programs may compensate the negative impact of the programs may compensate the negative impact of the
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disaster over time,
disaster over time,

– The negative effects on the most affected sectors and on
The negative effects on the most affected sectors and on
individuals working in those sectors may not be overcome fast individuals working in those sectors may not be overcome fast
enough, and positive effects will occur in the construction and enough, and positive effects will occur in the construction and
other related sectors and on persons working in themother related sectors and on persons working in them
–– There still be a negative impact on overall development, since
There still be a negative impact on overall development, since
financial resources that would be used for normal development financial resources that would be used for normal development
would have to be assigned to replace assets damaged by the would have to be assigned to replace assets damaged by the
disaster, leaving aside predisaster, leaving aside pre--disaster development needsdisaster development needs
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Overall GDP Performance:Overall GDP Performance:
Honduras and Hurricane MitchHonduras and Hurricane Mitch
3.0
4.0
5.0
6.0
h, %
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-2.0
-1.0
0.0
1.0
2.0
1995 1996 1997 1998 1999 2000 2001 2002
GDP Growt
Pre-Disaster
Post-Disaster
Selected Sector Performance:Selected Sector Performance:
Honduras and Hurricane MitchHonduras and Hurricane Mitch
2.5
7.5
12.5
o
wth, %
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-12.5
-7.5
-2.5
1995 1996 1997 1998 1999 2000 2001 2002
Sector GDP Gr
o
Agriculture
Industry
Commerce
Construction
Develop postDevelop post--disaster forecast of disaster forecast of
macromacro--economic performance ..economic performance ..
For analysis of
For analysis of balance of paymentsbalance of payments
1.
1.Using latest pre
Using latest pre--disaster projection on BOP disaster projection on BOP
performance for the current year (and subsequent performance for the current year (and subsequent
years where disaster effects are still to be felt)years where disaster effects are still to be felt)
2.2.Superimpose estimated higher imports and lower
Superimpose estimated higher imports and lower
ex
p
orts of
g
oods and services
,
as estimated in sectorex
p
orts of
g
oods and services
,
as estimated in sector--
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p g,
p g,
by
by--sector assessment sector assessment
3.3.Superimpose the likely effects of economic recovery
Superimpose the likely effects of economic recovery
and reconstruction programs, taking into consideration and reconstruction programs, taking into consideration
any possible delays in executionany possible delays in execution
4.4.Estimate the post
Estimate the post--disaster position of the balance of disaster position of the balance of
paymentspayments
5.5.Compare these results with the pre
Compare these results with the pre-- or nonor non--disaster disaster
forecasts, to ascertain the impact of the disaster on forecasts, to ascertain the impact of the disaster on
balance of paymentsbalance of payments
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Develop postDevelop post--disaster forecast of disaster forecast of
macromacro--economic performance ...economic performance ...
For analysis of impact on
For analysis of impact on fiscal budgetfiscal budget
1.
1.Using latest pre
Using latest pre--disaster projection on fiscal budget disaster projection on fiscal budget
performance for the current year (and subsequent performance for the current year (and subsequent
years where disaster effects are still likely to be felt)years where disaster effects are still likely to be felt)
2.2.Superimpose estimated government losses in
Superimpose estimated government losses in
d i i dit ti t d
d i i dit ti t d
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revenues an
d

i
ncreases
i
n expen
dit
ures, as es
ti
ma
t
e
d
revenues an
d

i
ncreases
i
n expen
dit
ures, as es
ti
ma
t
e
d

in sectorin sector--byby--sector assessment, and ensuring no sector assessment, and ensuring no
duplicationsduplications
3.3.Estimate the post
Estimate the post--disaster performance of the disaster performance of the
government budgetgovernment budget
4.4.Compare these results with the pre
Compare these results with the pre-- or nonor non--disaster disaster
forecasts, to ascertain the impact of the disaster on forecasts, to ascertain the impact of the disaster on
fiscal performancefiscal performance
Example of
Example of
MacroMacro--Economic Impact AnalysisEconomic Impact Analysis
The Influenza Pandemic Disaster
The Influenza Pandemic Disaster
From Effects on Population
From Effects on Population
to Socioto Socio--Economic ImpactEconomic Impact
Flu
Flu
People become ill
People become ill
Cost of medical
Cost of medical
Care/treatmentCare/treatment
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People

become

illPeople

become

ill
Accompanying
Accompanying
Relatives and friendsRelatives and friends
Temporary loss in
Temporary loss in
productionproduction
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From Temporary Absence to WorkFrom Temporary Absence to Work
to Socioto Socio--Economic ImpactEconomic Impact
Increased costs of health care
Increased costs of health care
Lower production
Lower production
in domestic sectorsin domestic sectors
Agriculture
Agriculture
*
*
**
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Agriculture
Agriculture
Livestock production
Livestock production
Industry
Industry
Mining
Mining
Commerce
Commerce
Transport & Communications
Transport & Communications
A Problem
A Problem
Of SupplyOf Supply
External Shock to the Economy
External Shock to the Economy
News abroad of flu pandemic in country
News abroad of flu pandemic in country
Sudden drop in tourist arrivals,
Sudden drop in tourist arrivals,
Precisely at start of seasonPrecisely at start of season
Tourism demand sta
y
s de
p
ressedTourism demand sta
y
s de
p
ressed
*
*
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y p
y p
until WHO authorities declare
until WHO authorities declare
country pandemiccountry pandemic--freefree
Tourism income vanishes for
Tourism income vanishes for
an entire seasonan entire season
Employment and income in
Employment and income in
sector drops accordingly, evensector drops accordingly, even
below level of workforce absenteismbelow level of workforce absenteism
SARS
SARS
A Problem
A Problem
Of DemandOf Demand
Application of ECLAC Methodology
Application of ECLAC Methodology
to Flu Pandemic caseto Flu Pandemic case
Ex post
Ex post assessment of disaster effects and impact
assessment of disaster effects and impact
Flu pandemic requires Flu pandemic requires ex ante
ex ante application of
application of
methodology to analyze futuremethodology to analyze future--disaster scenariosdisaster scenarios
Adaptation to case of health crisis using population as Adaptation to case of health crisis using population as
input for analysis: the temporary absence of laborinput for analysis: the temporary absence of labor
Basic assumptions
Basic assumptions
:
:
(Di t) l ti hi b t i ll ti
(Di t) l ti hi b t i ll ti
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(Di
rec
t)
re
l
a
ti
ons
hi
p
b
e
t
ween econom
i
ca
ll
y ac
ti
ve
(Di
rec
t)
re
l
a
ti
ons
hi
p
b
e
t
ween econom
i
ca
ll
y ac
ti
ve
population and productionpopulation and production
Temporary reduction in labor causes production Temporary reduction in labor causes production
declinedecline
Population to be affected across the board (in all Population to be affected across the board (in all
sectors of activity) equallysectors of activity) equally
Derivation of labor absence coefficient that applies Derivation of labor absence coefficient that applies
to production reductionto production reduction
Exception: external shock in tourism due to fear of Exception: external shock in tourism due to fear of
contracting the flucontracting the flu
SARS
SARS
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Estimate of Impact on PopulationEstimate of Impact on Population
Days of
Days of
Absence fr WorkAbsence fr Work
Moderate Moderate
ScenarioScenario
SevereSevere
ScenarioScenario
11 28,161
28,161 28,161
28,161
2
2
372 943
372 943
372 943
372 943
Using Flu Surge model, estimates were made of population
Using Flu Surge model, estimates were made of population
that will be absent from work (patients and accompanying relatives)that will be absent from work (patients and accompanying relatives)
GFDRR 22
2
2
372
,
943372
,
943
372
,
943372
,
943
3 to 4
3 to 4 209,881
209,881 166,423
166,423
55 3,064
3,064 35,108
35,108
1010 541
541 6,195
6,195
1212 3,482
3,482 39,899
39,899
2525 614
614 7,041
7,041
Weighted Labour Absence Coefficient is Derived
Weighted Labour Absence Coefficient is Derived
Individual Sector Analysis
Individual Sector Analysis
Labour Absence
Labour Absence
CoefficientCoefficient
Calendar of Productive
Calendar of Productive
Sector ActivitiesSector Activities
Any Seasonalities?
Any Seasonalities?
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Monthly Production
Monthly Production
Or Sales EstimatesOr Sales Estimates
(Current Values)(Current Values)
Estimate Losses due
Estimate Losses due
To Labor AbsenceTo Labor Absence
Estimate Lower
Estimate Lower
Exports and HigherExports and Higher
ImportsImports
Estimate Value
Estimate Value
Added of LossesAdded of Losses
The occurrence of the flu pandemic
The occurrence of the flu pandemic
It was assumed that the flu pandemic would occur in two waves, the
It was assumed that the flu pandemic would occur in two waves, the
first of which would start in the fourth quarter of 2006 and the first of which would start in the fourth quarter of 2006 and the
second one in the second quarter of 2007second one in the second quarter of 2007
Thru use of the Flu Surge model, the absence of labour was Thru use of the Flu Surge model, the absence of labour was
estimated and the following weighted labour absence coefficients estimated and the following weighted labour absence coefficients
were derived for the estimation of production losseswere derived for the estimation of production losses
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Labor
Labor
Absence Absence
Coeff.Coeff.
Flu Pandemic ScenarioFlu Pandemic Scenario
ModerateModerate SevereSevere
11
st
st
Wave
Wave 22
nd
nd
Wave
Wave
TotalTotal 11
st
st
Wave
Wave 22
nd
nd
Wave
Wave
TotalTotal
MonthlyMonthly 0.03320.0332 0.00660.0066 0.03980.0398 0.04710.0471 0.00940.0094 0.05650.0565
AnnualAnnual 0.00280.0028 0.00060.0006 0.00330.0033 0.00390.0039 0.00080.0008 0.00470.0047
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Special case: Tourism SectorSpecial case: Tourism Sector
The tourism sector is expected to follow a different pattern
The tourism sector is expected to follow a different pattern
after the flu pandemicafter the flu pandemic
Rather than reducing its sales due to the absence of local Rather than reducing its sales due to the absence of local
labour, this sector will sustain high losses due to the labour, this sector will sustain high losses due to the
absence of tourist from abroad, in a fashion similar to absence of tourist from abroad, in a fashion similar to
the case of SARS
the case of SARS
GFDRR 25
the

case

of

SARSthe

case

of

SARS
Foreign tourists, upon learning that a country has the flu,
Foreign tourists, upon learning that a country has the flu,
will abstain from traveling to the country, until such time will abstain from traveling to the country, until such time
as an international organization (WHO/PAHO) certifies as an international organization (WHO/PAHO) certifies
that the disease has been erradicatedthat the disease has been erradicated
It has been estimated that only the most essential travel It has been estimated that only the most essential travel
will be undertaken, possibly by country nationals living will be undertaken, possibly by country nationals living
abroad, down to about 10% of the normal number of tripsabroad, down to about 10% of the normal number of trips
Special Case: Tourism Sector
Special Case: Tourism Sector
150000
200000
250000
o
ver Visitor
s
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0
50000
100000
O 2006
N
D
J 2007
F
M
A
M
J
J
A
S
O
N
D
Number of Stop
o
LossesLosses
US$ 1,600US$ 1,600
millionmillion
Jamaica: Summary of Losses (Million J$)
Jamaica: Summary of Losses (Million J$)
Sector of
Sector of
ActivityActivity
20062006 20072007 TotalTotal
ModerateModerate SevereSevere ModerateModerate SevereSevere ModerateModerate SevereSevere
AgricultureAgriculture 128.33128.33 180.45180.45 ------ ------ 128.33128.33 180.45180.45
MiningMining 216.09216.09 306.30306.30 43.2243.22 61.2661.26 259.31259.31 367.56367.56
ManufactureManufacture 738.28738.28 1,046.501,046.50 147.66147.66 209.30209.30 885.94885.94 1,255.801,255.80
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Construction
Construction 260.75260.75 369.60369.60 52.1552.15 73.9273.92 312.90312.90 443.52443.52
TradeTrade 550.18550.18 779.87779.87 110.04110.04 155.97155.97 660.21660.21 935.84935.84
TransportTransport 450.77450.77 638.96638.96 90.1590.15 127.79127.79 540.93540.93 766.75766.75
FinancingFinancing 212.08212.08 300.62300.62 42.4242.42 60.1260.12 254.49254.49 360.74360.74
TourismTourism 13,617.6313,617.63 13,617.6313,617.63 92,119.2892,119.28 92,119.2892,119.28 105,736.92105,736.92 105,736.95105,736.95
HealthHealth 4,421.334,421.33 9,275.219,275.21 884.27884.27 1,855.041,855.04 5,305.605,305.60 11,130.2511,130.25
TOTALTOTAL 20,595.4520,595.45 26,515.1326,515.13 93,489.1893,489.18 94,662.6994,662.69 114,084.63114,084.63 121,177.83121,177.83
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Impact of Flu Pandemic on Impact of Flu Pandemic on
El SalvadorEl Salvador´´s GDPs GDP
Values in Current Million US$
Values in Current Million US$
GFDRR 28
Impact of Flu Pandemic on
Impact of Flu Pandemic on
El SalvadorEl Salvador´´s GDP Growths GDP Growth
3 5
4
4.5
5
R
ate, %
GrowthGrowth
Ga
p
: 2.8
%
Ga
p
: 2.8
%
GFDRR 29
1.5
2
2.5
3
3
.
5
2001 2002 2003 2004 2005 2006 2007
Annual Growth
R
p %p %
Impact of Flu Pandemic on Impact of Flu Pandemic on
JamaicaJamaica´´s GDPs GDP
2
3
4
h
Rate, %
GROWTHGROWTH
GAP: 6.5%GAP: 6.5%
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-3
-2
-1
0
1
2004 2005 2006 2007
Annual GDP Growt
h
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Impact on JamaicaImpact on Jamaica´´s s
Balance of Payments in 2006Balance of Payments in 2006
2006
2006
BOPBOP
Estimated LossesEstimated Losses Revised BOPRevised BOP
ModerateModerate SevereSevere ModerateModerate SevereSevere
Goods BalanceGoods Balance -- 2,9112,911 -- 2,9532,953 -- 2,9722,972
Exports (FOB)Exports (FOB) 2,016
2,016 8.788.78 12.4312.43 2,0072,007 2,0042,004
GFDRR 31
Imports (FOB)
Imports (FOB) 4,927
4,927 33.5033.50 48.4048.40 4,9614,961 4,9754,975
Services BalanceServices Balance 788788 206.39206.39 206.39206.39 582582 582582
IncomeIncome -- 663663 -- 663663 -- 663663
Current Current
TransfersTransfers
1,6701,670 66.5266.52 94.2994.29 1,6031,603 1,5761,576
Current Account Current Account
BalanceBalance
-- 1,1161,116 -- 1,4311,431 -- 1,4781,478
Impact of Severe Flu Pandemic on
Impact of Severe Flu Pandemic on
GOES BudgetGOES Budget
2006
2006
No No
pandemicpandemic
2006 2006
After After
pandemicpandemic
Central Government PerformanceCentral Government Performance

• Million US$
Million US$ -
- 74.2
74.2
GFDRR 32

• As % of GDP
As % of GDP -
- 0.4
0.4
Decline in revenues due to pandemicDecline in revenues due to pandemic 11.811.8
Increase in expenditures due to Increase in expenditures due to
pandemicpandemic
57.257.2
Central Government PerformanceCentral Government Performance

• Million US$
Million US$
•• As % of GDP
As % of GDP
-- 143.2
143.2
-- 0.7
0.7
Thank you!
Thank you!
GFDRR 33
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