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Fragile prosperity: Natural disasters and economic growth in small island developing states

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  • Giovanni Valensisi
  • H. Birce Akay

Abstract

This study re-examines the complex link between climate-related disasters and economic growth in developing countries, with a focus on the specific vulnerabilities of Small Island Developing States (SIDS). Using system GMM estimation, the analysis reveals that SIDS experience disproportionately severe medium-term growth setbacks compared to other developing nations, even after accounting for standard growth determinants. This can be linked to sector-specific pathways of vulnerability, as storms have a relatively more pronounced impact on services growth, and floods on industrial value-added growth. For SIDS, whose economies are poorly diversified and highly dependent on volatile services exports such as tourism, economic diversification emerges as a key avenue to mitigate exposure to shocks and build endogenous resilience.

Suggested Citation

  • Giovanni Valensisi & H. Birce Akay, 2026. "Fragile prosperity: Natural disasters and economic growth in small island developing states," UNCTAD Working Papers #12, United Nations Conference on Trade and Development.
    • Handle: RePEc:unc:wpaper:12
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