Typhoon shocks pose risk to growth – IMF

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February 6, 2026 | 12:00am

MANILA, Philippines — More frequent and destructive typhoons are increasingly acting as a double shock to the Philippine economy, with new analysis from the International Monetary Fund (IMF) showing that severe storms can simultaneously push up inflation and drag down output.

In a report released in January, IMF staff found that the most intense category-5 typhoons in the Philippines act like adverse supply shocks, disrupting agriculture, damaging capital and rippling through supply chains.

Empirical estimates show that these storms raise regional headline inflation by about 0.4 percent and food inflation by around 0.7 percent, with the peak effect typically felt one quarter after landfall.

At the same time, regional output falls by roughly 0.4 percent on impact, translating to an estimated 0.2 to 0.3 percent drag on aggregate gross domestic product (GDP), while agricultural labor productivity declines by about 2.5 percent.

“These estimates show that typhoons act as adverse supply shocks, particularly in the agriculture sector, likely raising inflation while dampening economic activity and further posing a dilemma for monetary policy,” the IMF said.

The study underscored that agriculture sits at the center of the shock. Damage to crops and farm capital not only curtails output but also fuels food price spikes, which carry outsized weight in inflation expectations in the Philippines.

The IMF noted that this “food price salience” means even temporary price increases can leave more persistent marks on inflation, making it harder for the Bangko Sentral ng Pilipinas (BSP) to balance its mandate of price stability with the need to support recovery after disasters.

Using regional data and macroeconomic modeling, the IMF also warned that while a single powerful typhoon may have limited national impact, a year marked by multiple severe storms can become macro-critical.

In downside scenarios with successive strong typhoons, quarterly GDP could fall by about 0.25 percent while inflation rises sharply, forcing difficult trade-offs in monetary policy.

Beyond short-term shocks, the paper highlighted longer-term climate risks. Rising temperatures and sea levels could inflict lasting damage on growth, with previous estimates suggesting climate change could shave as much as 7.6 percent off GDP by 2030 and 13.6 percent by 2040 if left unaddressed.

Without adaptation, annual costs from rising sea-level could reach nearly two percent of GDP, although these losses could be cut dramatically through protective infrastructure and managed coastal retreat.

Looking ahead, the IMF said that climate risks need to be more deeply embedded in both monetary and fiscal frameworks.

For monetary policy, the analysis suggested that a balanced response that supports rebuilding while keeping inflation expectations anchored is more effective than rigid inflation targeting or overly accommodative stances.

Clear communication and data-dependent adjustments are critical, especially given the sensitivity of inflation expectations to food prices.