By Dr. Gyan Pathak
The global cost of disasters is growing: The economic burden of disasters is intensifying. While the direct costs of disasters averaged USD 70–80billion a year between 1970 and 2000, between 2001and 2020 these annual costs grew significantly to USD 180–200 billion. Now in 2025, total disaster costs are estimated USD 2.3trillion annually when losses to health, education, livelihoods, ecosystems and supply chains are factored in. That is nearly ten times the annual direct losses reported in official figures.
The Global Assessment Report (GAR) 2025 of UN Office for Disaster Risk Reduction (UNDRR) says that the “big five” disasters—earthquakes, floods, storms, droughts and heatwaves—account for over 95% of direct losses in the past two decades, many of which are preventable.
The report warns the world about more intense future risk and the costliest hazards up to 2050. As for future earthquake risks, it says that cities are projected to add 1.2 billion residents, and 98.4 per cent of them will be in the Global South. They will need resilient infrastructure. Losses from flooding will increase between 5 per cent to 13 per cent. In a high-emission climate change scenario losses from storms and tropical cyclone could increase by 35.6%. There will also be compounding landslide risks. Draughts may affect over three-quarters of the world’s population.
The report further warns that over 90% of the land is at risk of becoming degraded by 2050, up from the current 40 per cent. In business-as-usual scenarios an additional 300 million hectares of forests and other natural ecosystems could be destroyed between 2015 and 2050, primarily due to natural land being converted to cropland, with grasslands particularly vulnerable.
At present, soil erosion rates are much higher than soil formation rates. This matters for current and future generations because soil is a finite resource, meaning its loss and degradation are irreversible within a human lifespan. It can take upto 1,000 years to produce just 2–3 centimetres of soil, the report warns.
On impact of extreme heat it gives example of India, and says that the effects of shifting weather conditions on agriculture and other sectors are projected to result in 9 per cent fall in living standards by 2050, if no action is taken.
Disaster risk is increasingly a systemic threat to financial stability on a global scale, GAR 2025 says. There have been vast and under-reported losses that until recently remained invisible. These include migration costs, the loss of informal sector income, long-term health and educational attainment declines, or the cascading effects of infrastructure outages, such as electricity blackouts from tropical cyclones that can affect up to 80 million people in a single event.
Crucially, these impacts are not distributed equally. Small, developing countries may suffer lower absolute losses, but those losses often represent a devastating share of gross domestic product (GDP).Storms that cost 0.2% of GDP in North America might wipe out 46% of GDP in a Pacific island nation.
While affluent households often have buffers, poorer communities face catastrophic outcomes from even modest shocks, with asset losses triggering years of hardship. These “wellbeing losses” are a key focus of emerging resilience metrics, which show how deeply disasters can undermine living standards, especially in highly unequal societies.
Furthermore, disaster impacts do not stop at national borders. Nature loss, mass displacement, disrupted food systems and financial contagion are all part of a more interconnected, systemic risk picture.
Current Annual Average Loss (AAL) calculations for three hazards, floods, tropical cyclones and earthquakes, put losses to critical infrastructure alone at over$250 billion a year, with particularly high exposure in Asia and the Americas.
Between 1970 and 2023, the economic cost of geophysical disasters like earthquakes accounted for an estimated $1.59 trillion. The direct impacts of some 24,433 reports of floods, storms, droughts and extreme heat worldwide led to more than $5.18trillion in economic losses, while other disasters totalled an additional $0.10 trillion.
Hazards like floods and earthquakes can also trigger compound disasters, such as landslides in mountainous areas, which have associated average annual economic losses estimated to be $26 billion globally.
Droughts also constituted a major economic burden. Based on historical data, recent estimates suggest that their impacts cost approximately $307 billion annually.
The costs of extreme heat are also increasing. Between 2000 and 2023, extreme temperature events caused economic damages close to $73billion. Additional hazards such as wildfires are becoming more costly globally.
Nevertheless, looking only at the ‘big five’ hazards (earthquakes, floods, storms, drought and extreme heat) does not capture the scale of disaster-related losses. In 2023, those five hazards accounted for direct economic costs of over $195.7 billion, or approximately0.015% of global GDP.
However, much of what is lost during and after a disaster, in livelihoods disrupted, degraded ecosystems or lives derailed by displacement or long-term health impacts, is not counted. Once cascading costs are considered, the estimated indirect economic impact of disasters in 2023climbs to roughly $2.3 trillion or 0.2% of global GDP.
While these figures remain estimates, the key message is that disasters can have outsized and multiplying impacts on economies, so policy choices and investment patterns to reduce the risk of hazard impacts (including climate change) matter.
For example, the indirect impacts of extreme heat not only disrupt everyday life but also lead to long-term economic and social costs. Extreme heat increases energy demand, reduces work productivity and strains healthcare systems due to a rise in heat-related illnesses. In urban areas, extreme heat events cause maintenance and repair costs to surge by 12–15%, resulting in an extra cost burden of about $4.5 billion annually in major cities, posing significant challenges for sustainable urban planning.
Zooming in on the agriculture sector, the past 30years have seen an estimated loss of $3.8 trillion in crops and livestock production due to disaster events, translating to an average annual loss of $123billion per year, or 5% of global agricultural GDP. (IPA service)
