Despite significant damage to infrastructure and agriculture at the hands of Typhoon Haiyan, one of the deadliest storms in history, the Philippine economy is expected to continue growing. In November last year, Typhoon Haiyan killed 6,100 people, displaced 4.1 million and damaged 1.14 million homes. The short-term effects of Haiyan are impossible to ignore. Economic Planning Secretary Arsenio Balisacan estimated that the typhoon could knock as much as 0.8 percent off the already depressed GDP, significantly slowing growth in the fourth quarter of 2013.

Furthermore, the currency reached its lowest point since 2010 at 45.25 pesos to $1 in January. Yet these impediments bear little importance in the longer term. Looking at the broader economic trajectory, the Philippine economy has continued to grow. In 2013 alone, its GDP growth rate stood at 7.4 percent, compared to 6.7 percent in 2012. The country’s economic growth rate has remained at a seven percent average since the third quarter of 2012, making it the second fastest-growing economy in Asia behind only China. Moreover, the Centre for Economics and Business Research forecast predicts that the country’s economy “will rise gradually from 42nd position in 2012 to 28th in 2028”.

In the months leading up to Haiyan, the Philippines suffered a series of other setbacks, including a 7.2-magnitude earthquake and political confrontation between Muslim rebels and government forces. Nevertheless, it has started the year strong, moving up eight places on the 2014 Index of Economic Freedom to 89th. Economic forecasts also remained positive, predicting growth of seven percent in 2013 and 6.7 percent in 2014.

Owing to the storm, however, the World Bank lowered its 2013 and 2014 forecasts to 6.9 and 6.5 percent respectively. The typhoon has marginally lowered these estimates for the time being, the reconstruction following the devastation is expected to boost the country’s economy in as early as 2015. Regardless of shaky economic forecasts for 2014, predictions for the country’s long-term economic success remain enviable.

Impacts on the larger and local scales
Although central areas of the Philippines have suffered catastrophic damage at the hands of Haiyan, economists believe that the financial impacts will be minimal. “Without doubt, the typhoon will have a negative impact on the country’s economic growth, but as callous as it sounds, the impact will probably not be all that big,” said Global Intelligence Alliance Managing Director, Aleksi Grym.

Despite the fact that many areas of the country were reduced to rubble, the economy’s strong structure remains intact

“The long-term outlook for the economy remains more or less unchanged. Investments into emerging markets like the Philippines are made with very long time-horizons in mind, and the risks, whether coming from natural disasters, political stability, or other sources, are more or less understood.”

Despite the fact that many areas of the country were reduced to rubble, the economy’s strong structure remains intact. For decades, the Philippines was dismissed as having little to no economic potential, yet under the governance of President Benigno Aquino III, the country has increased spending, decreased deficits and improved political administration, and emerged as a favourite destination for foreign investment.

The future of the Philippines still seems bright. Analysts say that these natural disasters could be an economic blessing in disguise as efforts to rebuild resilient infrastructure is a long-term investment could ultimately boost the regions hit the hardest by the typhoon, as well as the GDP.

Speaking to foreign correspondents in the wake of Haiyan, the governor of the Philippines’ central bank, Bangko Sentral ng Pilipinas (BSP), Amando Tetangco, said “as many analysts and other government officials have said, the economic impact is expected to be mild.”

He then continued to say that Haiyan could provide greater opportunity for government spending while also increasing remittances from Filipino workers abroad – already a significant source of income for the Philippine economy. With greater financial aid from family abroad, consumer spending is likely to increase. The government is injecting funds into the economy through relief and reconstruction. It is expected that Haiyan will not have a significant impact on inflation in the long-term, however, today limited supply has cranked up prices of even simple products; an egg, for example, costs twice as much as it did prior to the storm.

Additionally, the country’s changing demographic shows great economic promise. Previously, the Philippines had a large non-working population. With one dependent for every working-age Filipino, the country struggled.

“From 2013 to 2050, on average, there should be two working-age Filipinos for every dependent,” HSBC Asian economist Trinh Nguyen wrote in a report published at the end of 2013. “This should give the country a chance to significantly save and invest.”

Concern was expressed not for the economy but for the people affected by the typhoon. According to the United Nations’ Office for the Coordination of Humanitarian Affairs, 74 percent of fisherman and 77 percent of farmers lost their primary source of income.

Haiyan caused approximately $700m worth of damage to infrastructure and agriculture, while obliterating more than half a million homes. The typhoon has had more acute implications for local business, with not only people’s houses being washed away, but also their livelihood. Many people who lost their income and have resorted to selling produce, in particular fruits, on the street.

Relocating – or staying put – has also become a business decision.

“More than 90 percent of the city has cleared out now, the people around are all journalists, aid workers, people from other places trying to get relief handouts, because it is easier in Tacloban. All the businessmen are gone,” Ronnie Ramirez told reporters at the Wall Street Journal.

Ramirez previously owned a successful computer sales and repair business, and despite suffering heavy financial losses, he believes that by staying put he stands to gain more in the future.

“People are coming back, I guarantee and when they do, they will realise it is great to do business here—we need everything, from power, to construction, baked goods and fruits.”

Before returning to his technology business, Ramirez sustains himself – and his 40 employees – by selling leafy greens and red chillies on the street.

Natural disasters like Haiyan test multinational corporations’ relationships with local communities such as these, which in turn can strengthen or weaken big businesses’ image, explains Grym. In the Philippines, most large multinationals have “provided financial aid and actively participated in the recovery effort”.

Commodities trading
“Reconstruction and disaster recovery usually affects the trade balance of a country in a negative way, as the country requires more imports,” said Grym referring to the typhoon’s impact on trade. The Philippine Stock Exchange (PSE) – the country’s sole market institution – has held plans for commodities trading until ample infrastructure is built, focusing instead on deepening the capital market.

“I think right now that particular [commodities trading] project is put a bit at the backburner,” said PSE president and CEO, Hans Sicat. “We will make sure we have the full platform and infrastructure. Then it might be easier at that point to look at commodities.”

The effects of Haiyan have significant implications for agriculture output. The super typhoon damaged approximately 600,000 hectares of agricultural land, while destroying an estimated 1.1 million tonnes of crops, previous employee of the Department of Agriculture Arsenio Balisacan told the Wall Street Journal. The agricultural region affected by the storm produces commodities such as rice, sugarcane and coconuts, accounting for 12.7 percent of the Philippine GDP. The rice subsector alone suffered $53m worth of damage.

In 2008, the Philippines were the world’s biggest importer of rice, buying over two million tonnes from abroad. Investing in rice seeds and irrigation, the country had hoped to achieve self-sufficiency, but in light of the typhoon’s recent damage this dream has been put further out of reach. It would require 19.03 million tonnes of rice to become self-reliant, but being particularly prone to natural disasters, it is unlikely that it will achieve this goal as soon as originally expected.

While fruit has become widely accessible since the storm hit, rice remains somewhat of a rarity. “There was significant damage to rice stock here. Rice in the warehouses has been damaged and [is] wet,” a spokeswoman for the United Nations’ World Food Program, Silke Buhr, told the Wall Street Journal.

The Food and Agriculture Organisation of the United Nations (FAO) estimates that the Philippines will need to import approximately 1.2 million tonnes of rice, 20 percent more than it did in 2013.

Even if the Philippines were to achieve self-sufficiency, it would still be required to import rice to fulfil its international trade agreements. Previously it was cheaper for the Philippines to purchase rice from Thailand, Vietnam and Cambodia than to produce it locally (see graph). Under World Trade Organisation and Association of the Southeast Asian Nation trade agreements, the Philippines is required to import a minimum of 350,000 tonnes of rice to meet its access volume. Thailand and Vietnam both offered bids to supply the Philippines with its requested 500,000 tonnes. In the November tender, Vietnam beat Thailand’s offer of $475 per tonne with its bid of $462.25 per tonne.

Unforeseen factors
So far, the Philippine government has appeared in control of the country’s repair, while the future of the economy seems relatively stable. The planned costs of reconstruction were put at $2bn for this year. However, it is now more likely that the figure will reach $3.1bn, as steps are being taken to safeguard against future disasters. In the next four years, it is likely that the costs will near $8bn.

As well as building typhoon-resilient structures, the government is building temporary bunk houses to accommodate those displaced not only by Haiyan, but also the earthquake the month before. Though it cannot be known for certain, it is likely that such unforeseen costs will have adverse effects on the country’s finances.

While it is true that crises often result in a period of reform and revival, the government’s inability to factor in the extra 10-30 percent monetary investment needed for resiliency seems almost careless. The Philippines is hit by approximately 20 typhoons annually. Building resilient structures is a long-term investment, and one that the government initially overlooked.

Despite making four-year reconstructions plans, Aquino will leave office mid-2016. “We can say that we are doing our best to complete whatever we can do in the remaining two and half years,” Public Works and Highways Secretary, Rogelio Singson, said at a press briefing.

Moreover, Aquino’s popularity has been faltering recently due to allegations of corruption and oligarchic structures. Demands for proactive leadership are being made, and Aquino’s success with the Philippine economy is starting to be overlooked. Plans for the Philippines’ future are contingent on its government, and with $8bn in the air the fragility of the political situation could mean big changes to economic strategy.

The greatest risk to the Philippine economy, however, is not posed by monstrous typhoons or changes to political leadership, but regional foreign relations. After the Philippine coast guard shot a Taiwanese fisherman dead in disputed waters, Taiwain’s government threatened to close its borders to Filipino migrants. Similarly, Hong Kong Chief Executive CY Leung threatened the Philippines after eight Hong Kong tourists were killed after being taken hostage by a former Manila police offer. Hong Kong is a big employer of Filipino migrants, who constitute 1.9 percent of the population.

With overseas workers underpinning the country’s economy, these simple threats serve to highlight the country’s vulnerability. The Philippines may be susceptible to the devastating effects of typhoons and other natural disasters, but the true threat to the economy’s success story is down to the decision making of its people – political, migrant or otherwise.