Unpacking Macroeconomic Impacts of Climate Events and Policy Implications in the Philippines

Selected Issues Papers, January 30, 2026

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Canonical URL: Unpacking Macroeconomic Impacts of Climate Events and Policy Implications in the Philippines

Authors: Jean Christine Armas, Miss Yinqiu Lu, Margaux MacDonald, Nick Sander, Jeongwon Son, Azar Sultanov, Sihwan Yang
Published: January 30, 2026
Series: Selected Issues Papers
DOI: https://doi.org/10.5089/9798229037464.018

Category-5 typhoons raise regional headline CPI by around 0.4 percent.
Category-5 typhoons raise regional food CPI by around 0.7 percent.
The peak inflationary impact occurs approximately one quarter after the typhoon hits.
Category-5 typhoons lower regional GDP by approximately 0.4 percent on impact.
The regional GDP decline translates to approximately 0.2-0.3 percent of aggregate GDP.
Agricultural labor productivity declines by 2.5 percent following category-5 typhoons.
Interpretation: typhoons act as adverse supply shocks, particularly in agriculture, likely raising inflation while dampening economic activity and creating a dilemma for monetary policy.

Utilized the IMF’s Global Dynamic Network (GDN) model to construct counterfactual scenarios that:
- Assess the importance of sectoral heterogeneity in shaping output and inflation outcomes.
- Examine alternative monetary policy response functions to inform central bank tradeoffs between supporting output and containing inflationary pressures.
Used the DIGNAD model to simulate:
- The impacts of natural disasters on the economy.
- Policy trade-offs involved in enhancing resilience to natural disasters.
- Macro-fiscal implications of various policy options for the Philippines.

Monetary policy faces a dilemma when typhoons act as adverse supply shocks: tradeoffs exist between supporting output and containing inflationary pressures.
Sector-specific effects (notably in agriculture) are central to inflation and output dynamics after severe typhoons; policy responses should account for sectoral heterogeneity.
Enhancing resilience to natural disasters involves macro-fiscal trade-offs that require analysis of costs and benefits using models like DIGNAD.

Authors: Jean Christine Armas, Yinqiu Lu, Margaux MacDonald, Nick Sander, Jeongwon Son, Azar Sultanov, Sihwan Yang
Date: January 30, 2026
Series: Selected Issues Paper No. 2026/004
Pages: 40

Source: Unpacking Macroeconomic Impacts of Climate Events and Policy Implications in the Philippines (Selected Issues Papers 2026/004).