The Philippines could lose as much as one-fifth of its economic output within the next five decades if climate change effects continue unchecked, undermining long-term growth and fiscal stability.
According to the Organisation for Economic Co-operation and Development (OECD), a high-emissions scenario could shrink gross domestic product (GDP) by about 5 percent as early as 2040, with losses accelerating to 20 percent by 2070.
“As a tropical island nation, the Philippines is projected to remain severely impacted by climate change, with more intense and more frequent typhoons, accelerated sea-level rise, and more extreme rainfall events—all posing grave risks to businesses, communities, infrastructure, and ecosystems,” the OECD said in its first Economic Survey of the Philippines.
Further, extreme weather events can cut local economic activity by up to 2.2 percent on impact, with about 1.7 percentage points of that contraction persisting even five years later despite post-disaster adaptation, relief, and reconstruction efforts.
Direct fiscal cost
Separate data from the World Bank show that the direct fiscal cost of natural hazards amounts to about 0.5 percent of GDP annually. The OECD said this underscores the need to integrate climate change and its consequences into economic activity, employment, inflation, fiscal space, and public indebtedness.
The Paris-based organization also flagged the lack of projections of the future fiscal change of climate change in the country’s Medium-Term Fiscal Framework (MTFF) and Debt Sustainability Analyses (DSA).
“Effective fiscal policy is crucial for enhancing a country’s resilience to climate change. A regular assessment of government climate actions is essential—in particular those to protect vulnerable groups, strengthen infrastructure resiliency, and reform agriculture—in the context of medium-term budget planning and debt sustainability analyses,” the OECD said.
The country is already ranked first among 193 countries in the World Risk Index due to high exposure to hazards, compounded by an average of 20 typhoons annually, frequent earthquakes, volcanic activity, flooding, and sea-level rise.
Beyond science, societal vulnerability among the poor is heightened by fragile infrastructure and limited adaptive systems.
Calls for insurance
Despite the mounting risks, the OECD said most households remain uninsured, leaving millions vulnerable to climate-related losses.
As of 2025, the country’s insurance penetration rate reached only 1.79 percent, still behind regional peers and short of the Insurance Commission’s 2-percent target.
But this coverage is largely dominated by life insurance, the OECD noted. Property insurance, which could cover natural hazards, is optional and mostly limited to mortgage or commercial requirements.
“Low-income communities are typically uninsured in many parts of the world, despite being the most exposed to losses when a large weather disaster occurs,” the OECD said.
“Low demand for insurance coverage stems from financial illiteracy, weak financial inclusion, insufficient income to afford insurance premiums in many segments of the population, and the fact that property insurance is typically not mandatory,” it added.
Although the Philippine government has dedicated funds for calamities and disasters, the OECD said these efforts are insufficient.
“While these initiatives have improved the country’s protection against climate risks, much remains to be done to broaden insurance coverage for extreme weather events. Further initiatives to expand insurance coverage are urgent to help low-income groups better protect themselves from escalating climate risks,” the OECD said.
As an alternative, the organization suggested microinsurance as a low-cost option for low-income and informal sector households.
“Microinsurance has generally been successful in the Philippines, with 27 percent of the population covered by at least one microinsurance product (mostly health-care insurance), with policy holders generally low-income, informal sector, or those without access to conventional insurance,” it added.
