Alonzo, Roland C.

June 30, 2014

BSSW

Government Project: Post Typhoon Recovery Loan

Background:
The Supplemental Financing for the Second Development Policy Loan (DPL2) to
Foster more Inclusive Growth for Post Typhoon Recovery Project for Philippines,
launched in 2011, aims to support the Government's objective of fostering more
inclusive growth. The supplemental financing to the DPL2 will assist in addressing
the unanticipated financing gap caused by the unprecedented magnitude of the
typhoon which could jeopardize the Government's reform program. This document
describes a US$500 million supplemental financing to the second operation in the
programmatic development policy lending series. Before Typhoon Haiyan, locally
named 'Yolanda', struck the Philippines, economic looked excellent. In the first
week of November, a super typhoon developed in the Pacific and headed straight
for the Philippines. Typhoon Yolanda hit on November 8 with an estimated 11.2
million people affected across nine regions, per initial reports of the National
Disaster Risk Reduction and Management Council (NDRRMC). The typhoon has
struck areas which are among the poorest and most vulnerable. The typhoon has
disrupted the education of about 1.8 million children. Undisbursed balances from
ongoing projects in the portfolio, in an estimated amount of up to US$100 to 140
million, could be rapidly mobilized to support post-disaster reconstruction. A onetime emergency response restructuring of 3 to 5 projects is planned to quickly
support rehabilitation or reconstruction efforts in the typhoon struck areas, possibly
including roads and bridges, public facilities such as schools and health facilities,
irrigation schemes, shelters, and community-based infrastructure. The response
could include the provision of temporary incomes through cash-for-work and other
social safety net programs to typhoon victims.

Alonzo, Roland C.
June 30, 2014
BSSW

Needs:
The affected areas included those with some of the worst health outcomes in the
country. Now, initial reports indicate that about half of government hospitals and
rural health units have sustained significant damage; the supply chains for
medicines and equipment has been disrupted; the cold chain was destroyed; and
many health care workers have been displaced. Thousands of people need shortand long-term care from psycho-social stress and physical injuries, while the risk of
potentially life-threatening diarrheal and water-borne disease stemming from the
absence of clean water and sanitation has sharply increased. Furthermore, food
shortages experienced by typhoon victims will compromise the health of vulnerable
groups such as young children, pregnant women and the elderly. Overcrowding in
temporary shelters increases the risk of communicable disease; poor drainage and
stagnant water can increase the dengue risk; and there will be increased
environmental exposure due to damaged buildings.
Goals:
The World Bank Development Policy Loan (DPL) series supports key building
blocks of the inclusive growth agenda. The DPL series is an integral component of
the Banks broader lending program, fully in line with the Country Assistance
Strategys objectives: maintaining a stable macro economy, improving the
investment climate, improving public service delivery (in health and education), and
the cross-cutting objective of improving governance. The Philippines DPL series,
launched in 2011, aims to support the Governments objective of fostering more
inclusive growth. The proposed Supplemental Financing to the DPL2 will assist in
addressing the unanticipated financing gap caused by the unprecedented
magnitude of the typhoon which could jeopardize the Government's reform
program.

Alonzo, Roland C.
June 30, 2014
BSSW

Implementation:
The magnitude and pace of the implementation of the recovery program will
determine the Typhoons ultimate impact on poverty, job losses, and output losses.
For instance, the very preliminary initial assessment of the output loss due to the
typhoon (before recovery and rehabilitation) could lower the GDP growth rate by as
much as 0.9 percentage points in 2014 relative to the pre-typhoon estimate.
However, if the program is implemented quickly, with 50 percent of the spending
(US$1.5 to US$2.6 billion) undertaken in 2014, real GDP growth in 2014 would
decline by around 0.2 percentage points only. Providing quick disbursing financing
is therefore an urgent matter.
Planning:
The Government is currently preparing a Recovery and Reconstruction Plan.
Disaster response and recovery will constitute a considerable financial burden on
the budget of the national government and the affected local governments. Early
and initial quantitative estimates point to substantial costs. This includes estimates
for the rehabilitation of public infrastructure, combined with a social safety net
program, to restore at least pre-disaster levels of public service delivery. The sheer
magnitude of Yolanda could give rise to higher damage and casualties than were
caused by other recent storms/typhoons in the Philippines and other countries.
Evaluation:
The Philippines economic fundamentals are expected to remain strong, to
withstand the impact of typhoon Yolanda. Taking into account, the net effect of lost
income and reconstruction spending, GDP growth is foreseen to slow in the next
several months but recover in sequential terms. Much of the relief effort is
expected to compromise import intensive donor-supplied goods and services in
kind. Furthermore, reconstruction can be expected to support job creation in storm
affected areas, raising the employment intensity of GDP growth.