Measurement of Fiscal Vulnerability From Natural Disasters – The Case of Albania

Gerdi LITO

Abstract Natural disasters bring destruction and severe effects in the countries they hit. In small countries like Albania, where the insurance market is underdeveloped, the main role in absorbing disaster effects is often responsibility of the government. In this approach, the government is exposed from a fiscal point of view to the risk of natural disasters. This paper aims to measure the level of fiscal vulnerability in a country like Albania, caused by disasters that time after time hit the region, such as earthquakes or flood. This has been realized by calculating the disaster deficit index for earthquakes and flood, and the annual expected average loss from earthquakes. The results show for a high level of fiscal vulnerability in case of floods with a return period of 100 years and in case of earthquakes with a magnitude higher than 6.5 on Richter scale.
Keywords disasters, fiscal vulnerability, risk, disaster deficit index
JEL classification H84, H62
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