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. . . PPOO-5 Paul K Freeman Project Leader, Natural Catastrophes and Developing Countries (CAT) International Institute for Applied Systems Analysis Natural catastrophes can devastate developing economies and have especially negative irnpacts on the poor. Widespread destruction of human lives and assets are the familiar stories from the 700 major natural catastrophe events that occur annually. While natural disasters slow the pace of human development, are they a major impediment or a nuisance for long term sustainable growth? The lasting impact of a catastrophe related to the timely reconstruction of damaged capital stock. For many poor countries, their source of reconstruction financing is post catastrophe external borrowing. For countries with high levels of existing external debt, significant benefit may accrue from developing alternatives to post disaster borrowing to fund reconstruction. The identification oftheir long term exposure and current ability to absorb that exposure, is an important first step in planning viable policy options. Currently, this planning is not underway for the most vulnerable countries. The Natural Catastrophes in Developing Countries project was established in 1999 to create a methodology to measure the chronic impact of catastrophes on the economic growth prospects of a developing country. Under the auspices ofthe International Institute for Applied Systems Analysis in Laxenburg, Austria, the project leads a research initiative with the World Bank and the Swiss Reinsurance Company. The World Bank provides lIAS A with the macroeconomic projection models and data sets. Swiss Re participates in the research project by estimating earthquake, windstorm, and flood risk. Initially four case studies are being completed. The IIASA team then integrates Swiss Re's loss estimates into the World Bank's macroeconomic projections. The CAT project analyzes the direct and indirect economic impacts of catastrophes on developing countries. The project has created a framework to determine the total economic costs from natural catastrophe events, linking World Bank macroeconomic modeling to natural disaster modeling to measure the expected economic losses from natural catastrophes. This research platform facilitates estimating benefits of risk prevention and the development of tools to finance the cost of post-disaster reconstruction. Activities for the coming year will focus on using the framework to explore policy options to prevent, mitigate, or transfer the costs of natural catastrophes in developing countries. The inclusion of the chronic impact of catastrophes in the economic development of a selected group of countries could improve their ability to absorb the cost of catastrophes, and increase their long-term growth.