# 5. An approximation of economic impacts

The analyses in this work so far describe exposure in terms of the percentage of a certain asset affected by a natural hazard. This section aims to transform these estimates into figures that might be considered more tangible and easily interpretable. Specifically, it approximates economic impacts in monetary terms and in jobs affected.

## 5.1. General approach and assumptions

To transform exposure estimates derived in section 4 to economic figures, province-level economic data, such as contribution to GDP, export and employment data, obtained in section 3.8, are combined with asset exposure estimates from section 4. This translates flood exposure estimates into economic exposure estimates providing an approximation of the economic impact of the natural shock. To illustrate this, assume a 100-year coastal flood exposes 40 percent of the rice paddy fields in coastal provinces. Total yearly export value of rice derived from coastal provinces is $1.2 billion, providing jobs to 2.2 million people. Following the employed methodology, given flood would put at risk $480 million worth of exports and some 880,000 jobs. Following this methodology, impact estimates are produced under two simplifying assumptions.

First, sectoral output must be evenly distributed across all assets of that sector within each province. For hotels, as an example, this assumes that all hotels contribute equal revenue to GDP. For agriculture this means that there are no differences in yield and productivity across provinces, implying that X percent of crop fields in a certain province contribute exactly X percent of national crop production, and therefore also contribute X percent to agriculture GDP, agricultural export and job creation. In reality there are many factors affecting agricultural yield, such as different soil resources, water resources, availability of irrigation systems, input, and so forth. For rice, due to data availability, calculations take differential provincial yields into account. Due to data limitations, for other crops and orchards, this is not possible.

Secondly, the analysis is simplified considerably by assuming equal damage from all kinds of exposure to one natural hazard. It is assumed that if a certain asset is exposed to a certain shock, all annual output from that asset is exposed. In reality, damages to the business of a hotel experiencing flooding to a depth of 20cm will be different to one affected by 80cm of flooding. However, linking the amount of exposure to a degree of damage requires empirical damage curves which are not available in Vietnam, and hence would require considerable assumptions as well. The scope of this analysis assumes constant damages resulting from a binary exposure criterion.

Considering the simplifying assumptions made in the hazard assessment and in the conversion to economic estimates, the figures estimated here should not be treated as forecasts or certain facts. Instead, they represent an estimate of the extent of economic activity endangered by a natural shock of a certain return period. As such, they aim to serve as an easily interpretable and comparable approximation of the impacts of natural hazards that form the basis for policy discussions.

## 5.1. Economic impacts of flooding in the agriculture sector

For agriculture, an economic assessment is made separately for the aggregated cultivated crops sector and for rice. The economic impact for this sector is estimated using the exposure estimations from section 4. For both coastal and riverine flooding a inundation threshold of 25cm is applied. For aggregated corps total area per province used for cultivated crops is used to disaggregate national export value and 29