Estimation of Direct and Indirect Economic Losses Caused by a Flood With Long‐Lasting Inundation: Application to the 2011 Thailand Flood

Abstract

AbstractRiver floods are common natural disasters that cause serious economic damage worldwide. In addition to direct economic damage, such as the destruction of physical assets, floods with long‐lasting inundation cause direct and indirect economic losses within and outside the affected area. Direct economic losses include loss of opportunity, due to interruption of business activities, and the costs associated with emergency measures such as cleaning, while indirect economic losses affect sectors within the trade and supply network. Few studies have explicitly estimated direct and indirect economic losses in several sectors, due to the difficulty of modeling inundation depth and period at finer scales. Here we developed a global modeling framework to estimate the direct and indirect economic losses associated with floods using a computable general equilibrium model and a global river and inundation model, which can simulate the flood extent, depth, and period. Application of the method to the 2011 Thailand flood demonstrated that the estimated economic losses due to business interruption in the industry and service sectors totaled $14.7 billion, which was about two thirds of the estimated direct economic damage caused by the flood ($22.0 billion). The estimated indirect economic losses reduced the gross domestic product of Thailand by 4.81% in 2011, without considering transboundary effects, and will cause more than 0.5% reduction in gross domestic product even in 2030, resulting in $55.3 billion of total losses from 2011 to 2030. Comprehensive estimation of direct and indirect economic losses facilitates understanding of various types of flood‐related economic risks during and after a flood.