The cost of the next wave: Why tsunami risk matters
On 5 November the world observes World Tsunami Awareness Day. Tsunamis strike rarely, but when they do, the damage can be devastating.
When tsunamis occur, attention focuses on helping the immediate victims and providing lifesaving support. While this is no doubt essential, tsunamis also have long-term economic costs which are often ignored once the first wave of humanitarian relief has receded.
In poorer countries with narrow fiscal space and limited insurance penetration, the economic costs of a tsunami can often exceed national budget reserves several times over. As outlined in UNDRR’s recent GAR 2025 report, for some countries this can result in a negative spiral of borrowing, debt and increasing vulnerability – as was seen after both the 2004 Indian Ocean and 2011 Tohoku tsunami disasters. (You can find out more about the unsustainable development spirals in GAR 2025.) But actions to reduce disaster risk can interrupt these downward spirals.
A continuous drain on prosperity
When the costs of a single tsunami event are evened out into average annual loss (AAL), tsunamis are so destructive and expensive that they continue to account for a high percentage of losses even though they occur infrequently. These hidden annualized costs signal a continuous drain on prosperity, long after a tsunami has occurred.
And these costs hit smaller countries and economies hardest. For example, the chart below shows how Australia - New Zealand and Polynesia can factor in an average annual loss due to tsunami disasters of between USD 724 million and USD 52 million, respectively. However, while the AAL total loss figure is lower for Polynesia, because its economy is so much smaller, this loss accounts for 0.02 percent of their GDP, compared to 0.0015 percent for Australia – New Zealand: 13 times the cost relative to GDP.
Chart 1. Annual Average Loss due to Tsunamis (in $ Millions) and relative (cost to Gross Domestic Product - GDP) impact by subregion.
Source: UNDRR using CDRI, 2025.
A brake on development
This higher relative cost to countries can have significant macro-economic impacts. GAR2025’s fiscal-gap analysis further highlights how tsunamis contribute to into recurrent fiscal stress. As illustrated in the chart below, many small island economies with moderate to high tsunami risk may face a fiscal gap – essentially a period where they are unable to meet their current debt obligations – in the face of a 1:100 event, such as a large and rare tsunami.
And these tsunami costs hold back their development. Smaller economies and islands that are at moderate or high risk, like Somalia, Timor-Leste and Vanuatu, effectively carry a drag on their development associated with tsunamis of approximately 0.4-0.9 per cent of GDP annually.
Chart 2. Fiscal gap return period for tsunamis and Average Annual Loss in % of GDP of tsunamis by countries.
UNDRR using CDRI, 2025 and IIASA, 2025.
Note: If a Tsunami hits Saint Lucia, the economy will be on economic default between 350 to 400 years later, indicating that the risk is minimum. For Timor Leste, it would be the opposite: the risk of default will be between 0 to 50 years after the tsunami hits.
Tsunami risk reduction is a worthwhile investment
High-income economies with robust social protection and contingency finance, like Japan, recover within years (9 to 10 months according to data from World Bank). But for small and lower-income economies, rebuilding coastal infrastructure, schools, and hospitals can take decades, with well-being losses compounding the physical ones.
However, it is possible to reduce the risk of tsunamis and to invest in resilience before the event.
Tsunami-resilient infrastructure, coastal green belts, and community-based early warning systems have all proven to drastically reduce losses. Yet global financing for such measures remains a fraction of total relief or recovery aid. Better use of recent advances in risk information can help guide how to build resilience to tsunamis and prevent the spiralling costs of disasters.
So, as we commemorate this year’s World Tsunami Awareness Day, let's also remember that investing in tsunami risk reduction is a worthwhile investment in sustainable growth, not an added cost.
Each dollar spent on risk reduction can save lives; but it can also save money and help poor countries reach their development goals faster.