The Philippines is at risk of substantial economic losses from climate change, with rising sea levels, extreme heat, and threats to key industries expected to take a heavy toll on the country’s economy, according to the Organization for Economic Cooperation and Development (OECD).

In its Economic Survey of the Philippines released last week, Paris-based OECD projected that under a high-emissions scenario, climate change could reduce the country’s gross domestic product (GDP) by about five percent by 2040 and up to 20 percent by 2070.

The losses, OECD noted, are expected to stem largely from rising seas and damage to land and economic assets. Heat stress could curb labor productivity, while the fisheries sector may face major disruptions from warming oceans and shifting marine ecosystems.

As a tropical island nation, the Philippines is particularly vulnerable to heat waves, typhoons, heavy rains, and flooding. While the economy has shown resilience in the past, OECD cautioned that climate change could lead to output losses, higher inflation, tighter fiscal space, and increased hardship for vulnerable communities.

OECD said an analysis simulating a high-end emissions scenario against a baseline without global warming suggests that failing to act on climate change will drive rising economic costs for the country.

The organization noted that its high-end emissions simulations align with World Bank (WB) findings, which estimate climate-related GDP impacts of 5.7 to 7.5 percent by 2040 and 7.4 to 11 percent by 2050.

To mitigate these risks, OECD urged the Philippines to prioritize adaptation in disaster-prone areas through climate-resilient infrastructure, early warning systems, and integrated land-use planning.

It also recommended securing financing for nature-based solutions such as urban green corridors, improving building standards, and providing public cooling shelters.

On mitigation, OECD suggested adopting a voluntary long-term emissions reduction target alongside the country’s nationally determined contribution (NDC) targets for 2035.

It also called for negative emissions targets in forestry and mangrove management, with carbon credits from these efforts potentially traded in future emissions schemes.

OECD further recommended expanding the 2020 moratorium on new coal-fired power plants to include extensions of existing facilities and introducing a reverse auction system where coal plants could bid for compensation to stop coal-based generation in exchange for carbon credits.

Finally, the organization stressed reforms in water pricing to reflect true costs, including volumetric pricing, tiered tariffs, stricter regulatory enforcement, and adjustments to agricultural irrigation and urban water incentives.