Assessing Climate Change Risks: Potential Output Losses and Gains from Strengthening Resilience, Bahamas

Selected Issues Papers, April 11, 2025

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The Bahamas is highly vulnerable to the effects of climate change, including gradual sea level rise, biodiversity loss, and intensifying hurricanes.
These climate challenges threaten to undermine the country’s potential output over the long term by inflicting damages to physical assets and eroding natural capital, which is vital to its tourism-driven economy.
Risks are unevenly distributed: smaller islands are more exposed and sensitive than larger, more developed islands.
Addressing disparities and closing economy-wide adaptation needs through investments in structural resilience can unlock large potential output gains.

Sea level rise, biodiversity loss, and intensifying hurricanes are identified as major climate risks for The Bahamas.
Physical asset damages and erosion of natural capital are the primary channels through which potential output is threatened.
Tourism dependence amplifies the economic importance of preserving natural capital.

Smaller islands are more exposed and sensitive compared with larger, more developed islands.
Uneven distribution of risks implies targeted resilience measures are needed to address island-specific exposure and sensitivity.

Long-term potential output is at risk due to cumulative damages to physical assets and natural capital.
Investments in structural resilience and closing adaptation gaps are presented as pathways to unlock “large potential output gains.”

Invest in structural resilience across the economy to close adaptation needs.
Address island-level disparities in exposure and sensitivity through targeted interventions.
Preserve and restore natural capital critical to the tourism sector to reduce long-term output losses.