Climate change poses a significant threat to the country’s development that would potentially result in higher economic and human costs particularly for the poor, the World Bank said.

Souleymane Coulibaly, World Bank lead economist said climate shocks would negatively affect the country’s economic growth by eroding natural and physical capital, as well as reducing labor productivity.

Coulibaly also said that the effects of climate change would weaken the country’s financial stability, alter domestic and external competitiveness and strain government finances.

Ultimately, climate shocks would drag down the government’s poverty reduction effort, whose metrics mainly depend on economic growth and income distribution, Coulibaly noted.

Based on the World Bank estimates, the average output losses of the Philippines due to climate change will be at 3.2 percent of gross domestic product (GDP) by 2030 and could further rise to 5.7 percent by 2040.

Under the much worse scenario, the World Bank estimated that the costs of climate shocks could amount to 7.6 percent by 2030 and 13.6 percent by 2040.

The World Bank estimates were derived using the country’s historical typhoon information.

“As illustrated by this figure, you can see the poor would suffer the most. The poorer the households, the more negatively the consumption is estimated to be affected by climate change,” Coulibaly said.

According to the World Bank economist, if no measures is taken to address climate change, the poverty rate will increase by nearly one percentage point by 2040, economic insecurity by 3.3 percentage points and inequality by 0.3 percentage point.

The financial sector will also be affected for a one percentage rise in the typhoon damage ratio, and the non performing loan ratio rising by an average of 0.66 percent in the same period, Coulibaly said.

“This is this significantly increases in your credit risks,” he said.

However, the good news is that adaptation actions can reduce the impact of climate change.

“Measures to adapt to climate change could reduce economic losses by around two-thirds,” Coulibay said. “The cost of climate adaptation is substantial, but easily outweighed by the economic benefits of reduced climate change.”

World Bank estimated that the cost of making vulnerable new infrastructure in the Philippines climate resilience is estimated to be about 0.6 percent of GDP annually.

Whilethe agriculture sector measures to boost climate resilience would cost the government about 0.06 percent of GDP per year.

“However, depending on the financing mechanism of adaptation investment, short run GDP could be boosted by 0.7 percent compared to the baseline without investment,” he added.