and household expenditures by 7.1 percent.<sup>25</sup> Consequently, they found that typhoons led to significant reductions in human capital investments among affected households, especially in education (-13.3 percent) and health (-14.3 percent).<sup>26</sup> While food expenditures did not appear to decline as strongly among affected households, reductions in their food expenditure did extend over a longer period of time, in many cases beginning immediately in the year of storm exposure and continuing for three years afterwards.<sup>27</sup> These impacts are not disaggregated by income status, but highlight the relative burden on households possessing lower steady-state income and expenditure levels.

Limited savings and access to finance inhibit poor households’ ability to respond and recover from disasters, creating a cycle of poverty and vulnerability. In the event that livelihoods and/or assets have been destroyed by a natural disaster, poor households may be compelled to employ harmful strategies to cope due to a lack of savings and access to finance. For example, the Post Disaster Needs Assessment (PDNA) of Typhoons Ondoy and Pepeng that struck the Philippines in 2009 highlighted that: “the main coping strategy adopted after the disasters was to take on temporary work but this was found to be particularly challenging in rural areas with fewer opportunities to earn off-farm income... sources of credit regularly used prior to the storms often became unavailable... where households are able to borrow, they frequently use loans to cover basic expenditures and to pay back other loans ... households have had to reduce expenses further by cutting down on food, and there are reports of children being taken out of school and of older children working... with few assets and no land to sell, many of the most vulnerable households fear they may not be able to recover.”<sup>28</sup> In this way, poverty and vulnerability to natural hazards are closely linked and mutually reinforcing. Poor and socially disadvantaged groups are usually the most vulnerable to hazards, reflecting their social, cultural, economic and political environment. Disasters, in turn, are a source of transient hardship and distress and a factor contributing to persistent poverty. Indeed, at the household level, poverty is the single most important factor determining vulnerability to natural disasters.<sup>29</sup> Urban poverty and the growth of informal settlements have contributed to heightened vulnerability to natural hazards in the Philippines. The annual urban growth rate in the Philippines is 2.2 percent, and close to half of the population (49.3 percent) resides in urban areas.<sup>30</sup> This includes more than 12 million (around 21 percent) living in the Metro Manila area, which is also the world’s most densely populated city.<sup>31</sup> Around 45 percent of urban dwellings are in informal settlements (about 30 percent of which reside in Metro Manila), one of the highest proportions of informal settlers in the world.<sup>3233</sup> Ever growing numbers of rural migrants and urban poor live in these often precariously located and poorly constructed settlements. Indeed, the impacts of Typhoons Ondoy and Pepeng on the Metro Manila region in 2009 were found to have been exacerbated by the heavily polluted environment in urban areas, together with urban congestion and proliferation of slums.<sup>34</sup> This already high and increasing vulnerability to natural disasters has become ‘the new normal’ for the Philippines, carrying a high economic cost, and diverting resources away from longer term development efforts. Previous GoP estimates suggest the average direct cost of damages from disasters is about 0.5 percent of GDP annually.<sup>35</sup> In the future, the Philippines is expected to incur (on ‐ a long term average basis) about $4.6 billion per year in damage to assets due to earthquakes, tropical cyclones, and increased rainfall. In the next 25 years, the Philippines has a 40 percent chance of experiencing a loss of more than $18.8 billion and casualties greater than 70,000 people; it has a 10 percent chance of experiencing a loss of more than $44.8 billion and casualties greater than 95,000 people.<sup>36</sup> Consequently, the GoP has revised its original target to halve the official poverty rate from 34.4 percent in 1991 to 17.2 percent by 2015, to between 18-20 percent by 2016; this change takes into consideration the slow response of poverty to economic growth and the setbacks in 2013 due to the impact of disasters.<sup>37</sup> These natural disaster costs extend to losses in productivity and livelihoods, especially for informal workers. The PDNA for Typhoons Ondoy and Pepeng reported that informal workers were the worst affected, with “workers and micro employers in the informal sector the most vulnerable to natural disasters, especially small traders and vendors, food-related producers, service providers, self8