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Guidance Notes for Post-disaster Macroeconomic Assessment Agency responsible for the post-disaster macroeconomic assessment The government agency that is responsible for the post-disaster macroeconomic assessment is the National Economic and Development Authority (NEDA) in coordination with the National Statistical Coordination Board (NSCB) and the National Statistics Office (NSO). Since it produces estimations of economic indicators based on the damages and losses of the various sectors after a disaster, the assessment team should include economists, finance specialists and statisticians. It should also include other professionals that are well acquainted with the assessment methodology and with the socio-economic conditions of the affected areas.The assessment report by NEDA should be submitted to the OCD for consolidation. The final PDA, consisting of the damages and losses of all the sectors, the potential impacts, and the framework and identified programs and projects for recovery and reconstruction, will be presented by the OCD to the NDRRMC, international development partners and other stakeholders.Steps in Undertaking Post-Disaster Macroeconomic AssessmentGood baseline macroeconomic data and reliable assessments of the sectors are important to come up with an equally reliable macroeconomic analysis of disaster impacts. The following components are essential:The pre-disaster baseline information and data on the past and projected macroeconomic performance at national and regional levels;The damage and loss estimates of the sectors; andThe identified needs based on the damages and lossesStep 1. Compile Pre-disaster Baseline DataMacroeconomic analyses of disaster impacts are based on the pre- and post-disaster projections on economic performance. As such, vital information must be available beforehand to serve as the basis of the post-disaster assessment. The NEDA - through its various attached agencies like the NSCB and NSO - must ensure that the following information in the tables are readily available and can be accessed immediately for post-disaster damage and loss assessment purposes.Baseline Information No.1: National economic indices and projectionsA comprehensive understanding of the economic situation and projections before the disaster occurred is required to assess the impact of the disaster. The impact of the disaster is the difference between the situation expected in the period before the disaster and the situation that the country and regions are expected to experience after the disaster happened. Knowing beforehand the economic variables and projections will allow quickly estimation of the potential macroeconomic impacts once the disaster damages and losses are known. Good understanding of the economic situation will for instance also help identifying the sectors important for growth, which must be targeted in reconstruction and recovery efforts.The information in the following table should be available at the national level. Table 1. Pre-disaster national socio-economic indicators National levelIndicators (Value in Current prices, PhP)Past yearProjection for the Present YearProjections for the Next YearsYear 1Year 2Year 3GDP Total Government ExpendituresGovernment revenuesVATIncome TaxesDutiesOthersTotal Government RevenuesBudget deficit Balance of PaymentsSectors/Sub-sectors(Output in Current prices, PhP)AgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationOther IndicatorsEmployment (number)Unemployment (in %)Headline Inflation (in %)Notes in filling out Table 1.GDP refers to the gross domestic product.Tax revenues are broken down as value-added tax (VAT) if applicable, income taxes of firms and individuals, duties from imports and other applicable taxes like real estate fees, fees for permits to operate businesses, vehicles, etc.Other relevant statistics, such as gross capital formation, import and export figures, etc. could also be useful in the macroeconomic impact assessment, though these should be easily obtainable from NSCB or NSO.Baseline Information No.2: Regional economic indices and projectionsSimilarly, at the regional levels the following information should be compiled:Table 2. Pre-disaster regional socio-economic indicators Region:Indicators (in Current prices, PhP)Past yearProjection for the Present YearProjections for the Next YearsYear 1Year 2Year 3GRDP Tax revenuesVATIncome TaxesDutiesOthersTotal regional government expendituresSectors/Sub-sectors(Output in Current Prices, PhP)AgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationOther IndicatorsEmployment (number)Unemployment (in %)Headline Inflation (in %)Notes in filling out Table 2.GRDP refers to the gross regional domestic product.Step 2. Follow up the submission of the damages and losses assessments of the concerned agenciesIn order to estimate the economic impacts of the disaster, the assessments of the concerned agencies must be submitted to NEDA. They will serve as the inputs for the macroeconomic assessment. The sectoral agencies have their own guidance notes where instructions are provided on how to estimate damages, losses and post-disaster needs. Step 3. Analyze the Production Losses of the Sectors in the Year the Disaster Occurred at Regional LevelStep 3.1. Estimate impacts in the affected regions for the year that the disaster occurredBased on the submitted assessment reports of the agencies and using economic models, the NEDA can calculate the reduction in projected outputs in each sector/sub-sector by tabulating their pre- and post-disaster estimates for each of the affected regions. Table 3 below shows the consolidated value-added losses in the sectors/sub-sectors in current prices. Table 3. Pre-Disaster Estimates and Post-disaster Estimated Value-Added Production Losses Region:Sector/Sub-sectorProduction Effects Within the Year the Disaster Occurred (in Value-Added PhP)Pre-disaster EstimatesEstimated LossesRevised Post-disaster EstimateCurrent PriceCurrent PriceCurrent PriceConstant PriceABCDEAgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationTOTALNotes in filling in Table 3.The table above is in value-added terms.Column A is for the sectors/sub-sectors that were assessed after the disaster.Column D is for the revised post-disaster production estimates in value-added current prices for the sectors/sub-sectors. In formula, this is: Column B - Column C = Column D. Column E is for the revised post-disaster production estimates in value-added constant prices for the sectors/sub-sectors. This is derived by multiplying the value-added values in current process by the price deflator. In formula, this is: Column D x Price deflator = Column E. Step 3.2. Analyze the losses due to higher production costs and other losses in the affected regions, in current prices in the year the disaster occurredHigher production costs and other losses in some sectors may have positive impact in some selected sectors like trade and services. To account for this, higher production costs and other losses (aside from production losses) should be accounted for.Table 4. Higher Production Costs and Other Losses in Gross and Value-Added TermsRegion:Sector/Sub-sectorOther Losses Within the Year the Disaster Occurred (in Value-Added PhP)Higher Production CostCost of Cleaning UpOthersTotalCurrent PriceCurrent PriceCurrent PriceCurrent PriceConstant PriceABCDEFAgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationTOTALNotes in filling out Table 4.The table above is in value-added terms.The values of the losses due to higher production costs, cleaning and others in value-added terms are the values of reported losses in the assessment of the sectors multiplied by the value-added ratio or coefficient. The total value-added losses in constant prices are derived by multiplying the losses in current prices by the price deflator.Step 3.3. Analyze the production losses, losses due to higher production costs and other losses, in value-added current and constant prices in the year the disaster occurredLosses due to higher production costs and other losses of the various sectors will generally be a gain to other sectors/sub-sectors, particularly those engaged in trading (like materials and goods supply) and services (like construction and repairs) and rentals. For example, farmers who have to re-plant after a disaster totally destroyed their crops, may have a higher production cost for the same quantity of harvest within the year. In re-planting, traders of seeds, pesticides, fertilizers, etc. will have added income from the new purchases of the farmers. As such, the loss of the farmers will be the gain of the traders. The cost of cleaning up the debris or rubbles from the disaster will likewise require labor which is a gain to the services sector. To reflect the gains of some of the sectors/sub-sectors from the losses of the others, the following table can be used for each of the affected regions.Table 5. Post-disaster Estimated Income Losses and Gains From the Losses of the Other SectorsRegion: Sector/ Sub-sectorPost Disaster Estimated Losses & Gains in Value-Added Terms(Current Price, PhP)Total Estimated Losses (in PhP) Estimated Income LossesOther LossesGains From Other SectorsCurrent PriceConstant Price ABCDEFAgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationTOTALNotes in filling out Table 5.The table above is in value-added terms.Column B, the “Post-disaster Estimated Income Losses” refers to the production/income losses of the sector or sub-sector and should be a negative impact to the said sector or sub-sector. Column C, “other losses” refers to the values in table 4 above (the “higher production costs, cleaning up activities and others” of the sector or sub-sector) which will also be the value of gains of certain sectors.For example, trade and services can be expected to gain from the higher production costs of the agriculture sector while the construction and/or transport sub-sectors can gain from higher demand for their services in cleaning up the debris. Higher production costs of the other sectors or sub-sectors can be added to the trade and private or government services sectors since the higher production costs involve both inputs bought from the traders and labor for services. The assessment team of NEDA, if required in consultation with sector assessment teams, should be able to identify as to what sector or sub-sector the other losses in Column C will accrue as a positive impact or gain in Column D. In general, such losses will be a plus or gains to the trade and services sectors.Column E, the “Total Post-disaster Estimated Losses” in current prices will be the value of the post-disaster estimated production and other losses less the gains, if any, of the sector or sub-sector. In formula:Column E = Columns (B + C) – Column DColumn F is the value in constant prices which is derived from multiplying Column E with the price deflator as determined by the NEDA. Step 4. Repeat Steps 3.1, 3.2 and 3.3 for the losses of the sectors/sub-sectors for the years after the disaster occurred. The same process of estimation must be done for the years beyond the year that the disaster occurred. It is very possible that some sectors will gain from the potential purchases of construction materials and other inputs in the recovery and reconstruction phase. For example, traders of construction materials, construction companies as well as other service firms engaged in repairs may experience increase in income in the years after the disaster. Step 5. Estimate the Impacts of the Disaster on Gross Regional Domestic Product (GRDP) and Other IndicatorsStep 5.1. Estimate the impacts for the year the disaster occurred Based on the assessment on the reduction in output/income and potential gains of the sectors/sub-sectors, NEDA can calculate the effects on GRDP and other macroeconomic impacts. For GRDP, the NEDA can come up with the revised estimates as shown in the following table.Table 6. Impact on Gross Domestic Product for the year that the disaster occurredRegion:Indicator(in Value-Added Terms, PhP)Pre-disaster GRDP Projection Total Disaster Losses Revised Post-disaster GRDP ProjectionCurrent Prices Current PricesCurrent PricesConstant PricesABCDGRDP Notes in filling out Table 6.Columns A is for the value of the pre-disaster GDP estimate in current prices.Columns B is for the value of the total losses (in value-added terms) from the disaster in current prices from Table 5.Columns C and D are for the new GRDP estimate in current and constant prices for the year that the disaster occurred. It is derived from subtracting the total value-added losses from the pre-disaster GRDP estimate. In formula:Column C = Column A – Column BColumn D = Column C x Price DeflatorThe impacts to the other indicators of the economy can be projected for the year. The following table can summarize the impacts.Table 7. Impacts other macroeconomic indicatorsRegion:IndicatorsPre-disaster Projection for the Present YearPost-disaster Revised Projection for the Present YearIn Current Price PhPIn Current Price PhPTax revenuesVATIncome TaxesDutiesOthersOther Indicators(%)(%)Unemployment Inflationetc.Notes in filling out Table 7.TaxesTax revenues are expected to decrease because of the production and income losses of the productive sectors. The NEDA can calculate the reduction in taxes using historical data correlation between taxes and the gross value-added of the sectors and/or sub-sectors. On a simpler level, the reduction in income taxes can be estimated by the NEDA in consultation with the Bureau of Internal Revenue (BIR) or the Department of Finance (DOF) based on the estimated reduction in income of businesses. On the contrary, if the private sector can initiate their own reconstruction activities and foreign donors will procure their supplies in the domestic market, consumption will increase raising the collection of value-added taxes (VAT).UnemploymentEmployment or unemployment effects can be estimated by NEDA through the assessment of the sectoral agencies or through the regular unemployment surveys.InflationThe NEDA can estimate the disaster effects on inflation by estimating the effects of the on pre- and post-disaster supply of basic goods and commodities which are included in the basket of goods monitored for inflationary effects, like food, beverages, fuel, etc. This can be further validated by a survey of the prices of commodities within and outside the disaster area/s. However, to reflect a realistic price projection, the NEDA must consider the post-disaster added cost of production and distribution of the commodities in the basket of goods. Finally, the NEDA must consider the price elasticity of the commodities using their existing economic models to firm up the estimated effects on post-disaster prices.Step 5.2. Estimate the impacts for the years after the disaster occurredFor the years after the disaster, the GRDP can be estimated by consolidating the losses and gains of the various sectors for the years after the disaster occurred. The procedures in Step 4 should be followed using the estimates in production losses, costs of cleaning up and others and the gains of the concerned sectors for the years after the disaster. The following table will show the estimates.Table 8. Impact on Sectoral Incomes for the Years After The Disaster OccurredRegion:In Value-added Current Prices, PhPSub-sectorsProjected Production for the Years If No Disaster Occurred Estimated Production Losses Due to the DisasterRevised Projections for the Next Years After The DisasterYear 1Year 2Year 3Year 1Year 2Year 3Year 1Year 2 Year 3 ABCDEFGHIJAgricultureCropsLivestockFisheriesForestryIndustryManufacturingMiningPowerOthersTrade and servicesTourism Water supplyTransportationTelecommunicationTradeOther servicesGovernment ServicesHealthEducationTOTALNotes in filling out Table 8.Columns B, C and D are from the baseline information converted into value-added terms.The estimated losses over the years (Columns E, F and G) will be based on the sectoral reports of losses beyond the disaster year converted into value-added terms. The “Revised Projections for the Next Years After The Disaster in Value-Added PhP” (Columns H, I and J) will be the difference between the estimate for the year if no disaster occurred minus the losses for the same corresponding year after the disaster. Column H = Column B – Column E; Column I = Column C – Column F; Column J = Column D – Column G.Using the sectoral losses above, the impact on GRDP can be estimated below.Table 9. Impact on Gross Regional Domestic Product for the years after the disaster occurredRegion:IndicatorGRDP Projection Without Disaster (Constant Prices, PhP)Disaster Losses(Constant Prices, PhP)Revised GRDP Projection After the Disaster Year (Constant Prices, PhP)Year 1Year 2Year 3Year 1Year 2Year 3Year 1Year 2Year 3ABCDEFGHIJGRDP Notes in filling out Table 9.Columns B, C and D are the GDP projections if there was no disaster, which are from the baseline information converted into constant prices.The estimated losses over the years (Columns E, F and G) will be the consolidated losses of the sectors beyond the disaster year as shown in Table 8 converted into constant prices. The ‘Revised GRDP Projection After the Disaster Year’ (Columns H, I and J) will be the difference between the estimate of the year if no disaster occurred minus the losses for the same corresponding year after the disaster. Column H = Column B – Column E; Column I = Column C – Column F; Column J = Column D – Column G.For the other projected impacts to the economy, a similar analysis can be done and the following table can be used to consolidate the results.Table 10. Macroeconomic Impacts for the Years After the Disaster OccurredRegion:IndicatorsWithout Disaster Projection (PhP)After Disaster Projection (PhP)Year 1Year 2Year 3Year 1Year 2Year 3Tax revenuesVATIncome TaxesDutiesOthersOther Indicators(%)(%)(%)(%)(%)(%)Unemployment Inflationetc.Step 5.3. Summarize the Estimated Regional Economic Impacts Based on the previous table, the impacts on the regional economy can be summarized in the following table.Table 11. Summary of regional macroeconomic impactsRegion:IndicatorsDisaster Year EstimatesProjections for the Next Years Pre-disasterPost-disasterYear 1Year 2Year 3Pre-disasterPost-disasterPre-disasterPost-disasterPre-disasterPost-disasterReal GRDP Nominal GRDPTax revenuesNominal Values, PhPVATIncome TaxesDutiesOthersSectors/Sub-sectorsOutput in Nominal Values, PhPAgricultureCropsLivestockFisheriesForestryIndustryTrade and servicesOther IndicatorsEmployment (number) Unemployment (in %)Headline Inflation (in %)Step 6. Estimate the disaster impacts on the GDP and other national economic indicators The economic impacts on the region/s can be plugged into the national economic indicators. NEDA must be aware that regions that were not damaged by the disaster may also incur losses. For example, if and when there is massive death of cattle in the disaster-affected region, there can be huge losses to the meat processing industry in another region if the source of meat for processing comes from the affected region. On the other hand, the cement industry in the other regions may experience gains due to the increase in demand for cement from the damage-affected sector. NEDA must, therefore consider such possibilities in assessing the national macroeconomic post-disaster damages and losses. The following table will show the nationwide economic impacts of the disaster.Table 12. Post-disaster estimated national socio-economic indicators NationwideIndicatorsDisaster Year EstimatesProjections for the Next Years Pre-disasterPost-disasterYear 1Year 2Year 3Pre-disasterPost-disasterPre-disasterPost-disasterPre-disasterPost-disasterReal GDP Nominal GDPNational tax revenuesNominal Values, PhPVATIncome TaxesDutiesOthersSectors/Sub-sectorsOutput in Nominal Values, PhPAgricultureCropsLivestockFisheriesForestryIndustryTrade and servicesOther IndicatorsEmployment (Number)Unemployment (in %)Headline Inflation (in %)Step 7. Analyze and evaluate the economic impacts of the needs of all the sectors. The macroeconomic impacts of recovery and reconstruction will depend mostly on the amount, coverage, scope and implementation schedules of the activities that the government will undertake. For instance, the contribution to the GDP and employment of the reconstruction of infrastructure may be high but it may have repercussions on the budget deficit and the Balance of Payments, among others. Based on the submitted recovery and reconstruction needs of the various ministries and offices, the NEDA must be able to analyze the future impacts of the recovery and reconstruction needs. If the government decides to implement massive recovery and reconstruction activities, the macroeconomic impacts may be different. Massive recovery efforts will mean that the government will put in additional investment needed to expedite the return to normalcy which will quickly achieve the following, among others:Farmers will be able to replant.Factories will be able to resume operations.Transport facilities will open.Businesses will normalize.The estimated reconstruction and recovery needs could be plugged in the analysis in steps 3 to 6 as an alternative scenario. In that case, the scenarios with and without reconstruction and recovery efforts could be estimated. On budget and budget deficitIf the government decides to maintain or increase the budget after the disaster despite lower expected tax revenues, the budget deficit will rise. The government will incur debts to maintain the same level of or increase the budget under a lower tax revenue scenario. This will increase the budget deficit for the year.On balance of payments (BOP)The expected reduction of exports due to the disaster and whatever expected increase in imports that will be needed, such as food supply, medicines, construction materials and other equipment and machinery will adversely affect the BOP. The NEDA must be able to estimate this based on the submitted reports of the various sectors and/or sub-sectors. However, the NEDA should also account as plus the foreign currency coming in from foreign donors and remittance or donations from Filipinos outside the country to their relatives in the Philippines. The inflow of foreign currency from foreign donors and Filipino citizens abroad may offset a portion of export earnings.To account for the macroeconomic impacts of massive recovery and reconstruction, the NEDA can undertake scenario-building analyses with the appropriate estimates in collaboration with the line agencies. Step 8. Analyze and evaluate the relative priorities of the needs of all the sectors. Based on the submitted recovery and reconstruction needs of the various agencies, the NEDA must be able to provide inputs on the relative priorities of the proposed projects for recovery and reconstruction. The analysis should focus beyond the analysis of the agencies for their sectors and can consider the following:Contribution to the Economy. Disasters may cause losses to outputs that are very important to the economy. For instance, without assistance, a planting season may be missed by the farmers which will result in the scarcity of basic food supply like rice and corn that can cause inflation not only in the disaster-affected areas but also in other districts or even nationwide. Moreover, if damaged agricultural products along with electricity, minerals, livestock, tea, etc. are for export, the much needed foreign exchange for the country may be severely reduced. Inter-sectoral linkages. The outputs of manufacturing companies and other related services that are major contributors to the annual gross domestic product (GDP) can be drastically reduced if recovery activities will be delayed. Some of the questions that should be addressed are: What are the damaged structures or facilities (usually power and water supply) that are components of production in most sectors? How much is the overall potential loss per day if these facilities are not restored?What are the potential economic impacts from closure of government vital facilities like airports, ports, customs, etc?How much export earnings will be lost if recovery is delayed by, say 6 months or 1 year?What are the priorities that will avert a sharp decline in GDP within the year?What are the programs and projects that will fast track the recovery of the country in the medium-term? How much are the potential tax revenue losses if the productive sectors are not rehabilitated? The analysis of NEDA must provide an inter-sectoral list of priorities for recovery and reconstruction for the consideration of the DRRM Council at all levels.Step 8. Analyze Financing OptionsBased on the priorities identified, NEDA can suggest some possible sources of financing for recovery and reconstruction. The following can be considered:Internal financing. NEDA can examine the possibility of generating funds internally to finance the programs and projects. This can be done through reallocation of the existing budget or raising new taxes or floating of government bonds. The following issues should be considered:What are the possible impacts if new taxes are imposed? Is it acceptable to the people at present?What will be the effect of domestic borrowing on the short-term financial liability of the government? Foreign financing. If domestic financing is not enough, foreign funds can be considered. The following issues should be addressed, among others:Which donor has the better terms for the financing?What is the effect on long-term financial liability of the government?Are there existing loans that can be shifted or diverted to recovery projects?Private sector financing. Private business can possibly be involved in financing the recovery phase through the Public-Private partnership (PPP), build-operate-transfer schemes, etc. The NEDA must, however, analyze the feasibility and profitability of government financing versus private financing. Policy Measures. There are some policy measures which can assist in disaster recovery without needing for new funds. Policy responses may be preferable since they do not usually need new budgetary outlays - unlike new projects - although they may result into foregone future revenues. As such, these measures may be adopted on a temporary or time-bounded basis. Among those that may be considered are the following, or a combination thereof:Temporary reduction of taxes on specific vital inputs to production like fertilizers and seeds; equipment and machineries; etc.Moratorium on payment of debts owed from government sources, especially those from the poorest sector like farmers and micro-entrepreneurs who are usually not credit worthy to private sources of credit.Redirecting existing credit facilities to focus on specific groups such as farmers, micro- and small enterprises.Temporary suspension of government fees that are required to reconstruct damaged structures. Step 9. Draft and submit the report to the OCD Regional office for consolidationThe macroeconomic impact report should be drafted by NEDA with all the information identified in this guidance notes. The report can have the following general outline:Summary of damages and losses by sector and by sub-sectors The impact on the macroeconomic indices due to the damages and losses The needs of the sector, indicating the relative priority of projects for funding. The recommended financing options and policy framework. The NEDA can attach the descriptions, annual funding requirements and if possible, the logical frameworks (logframes) of the priority projects which were submitted by the line ministries. ................
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