The dilemma of natural disasters: Impact on economy, fiscal position, and foreign direct investment alongside Belt and Road Initiative countries

This paper investigates the damages and population affected by natural disasters based on percentile rankings, and analyzes the impact on the economy, per capita, fiscal balance, and foreign direct investment using novel panel algorithms in Belt and Road initiative countries (B&RIC) over 1990–2018. The results indicate that severe natural disasters have negatively influenced economic growth with an average size of −0.016, which is transmitted to fiscal balance (−0.011) and foreign direct investment (−0.0271) in the long-run. The results also imply that the intensity of severe disasters on the fiscal position of the B&RIC countries is negative with an average effect of −0.011; however, the trade-openness, FDI, and economic activities support to improve the fiscal balance in the long-run. The outcomes of the study further revealed that foreign direct investment is more elastic in response to natural disasters in these countries. Therefore, it is recommended that the policymakers in B&RI countries should integrate the economic impacts of natural disasters in long-term economic planning. This would help the policymakers for better fiscal decisions, attracting FDI inflows and preparedness in the aftermath of natural disasters