IMPACT OF EARTHQUAKES ON THE WORLD ECONOMY: A GLOBAL ANALYSIS

ABSTRACT

This article presents a global-scale analysis of the direct impact of earthquakes on the world economy and their financial consequences. The study comparatively examines the economic effects of the largest seismic events in history, as well as the devastating earthquakes that occurred in Türkiye and Syria in 2023, Japan in 2024, and Myanmar (Burma) in 2025, along with those in other countries. Based on statistical data, the research highlights the relationship between the absolute value of earthquake-induced damage and its relative share in a country’s gross domestic product. In addition, using the examples of countries such as Italy and New Zealand, the study advances the idea that earthquake-resistant infrastructure serves as a key factor of economic stability.

АННОТАЦИЯ

В данной статье в глобальном масштабе анализируется прямое воздействие землетрясений на мировую экономику и финансовые последствия. В исследованиях сравнительно изучались экономические последствия крупнейших сейсмических событий в истории, а также разрушительных землетрясений, произошедших в Турции и Сирии в 2023 году, Японии в 2024 году и Мьянме (Бирме) в 2025 году, и других стран. В исследованиях на основе статистических данных подчеркивается взаимосвязь между абсолютным значением ущерба, причиненного землетрясением, и его относительной долей в валовом внутреннем продукте страны. Кроме того, в таких странах, как Италия и Новая Зеландия, была выдвинута идея о том, что сейсмостойкая инфраструктура является фактором экономической стабильности.

Keywords: earthquake, economy, economic damage, global analysis, infrastructure, financial consequences, engineering analysis.

Ключевые слова: землетрясение, экономика, экономический ущерб, глобальный анализ, инфраструктура, финансовые последствия, инженерный анализ.

Introduction

As human civilization has developed, the impact of natural disasters on society and the economy has become increasingly complex [1]. Among natural hazards, earthquakes are distinguished by their unpredictability and their ability to cause massive destruction within seconds, requiring considerable time and resources for recovery [2]. In recent years, the rapid acceleration of global urbanization and the location of industrial zones in seismically active regions have pushed the financial cost of post-earthquake reconstruction to record levels [3]. Today, earthquakes are not only events that endanger human life but also powerful social and economic factors capable of undermining macroeconomic stability and disrupting global supply chains [4]. According to statistical data from international financial institutions and insurance companies, the average annual losses caused by earthquakes amount to billions of dollars. The disasters in Türkiye and Syria in 2023, the seismic events in Japan in 2024, and the destructive earthquake in Myanmar (Burma) in March 2025 have forced the global community to reconsider the issue of the “economics of disasters.” These events demonstrate that the economic damage of a disaster is not limited to the physical condition of buildings but is closely linked to a country’s gross domestic product (GDP), the development of its insurance market, and the resilience of its infrastructure [6, 7, 8].

The aim of this study is to analyze the impact of earthquakes on the global economy using statistical data, to realistically assess the types and scales of economic losses, and to identify strategic directions for mitigating future risks based on the global situation as of 2025. Furthermore, the research comparatively examines the differing economic burdens in developed and developing countries and evaluates international experiences in this context. The analyses presented in this article underscore the importance of seismic risk management in ensuring economic stability for 2025 and beyond.

A case study analysis of countries with elevated seismic hazard

Economic losses resulting from earthquakes are generally divided into two categories: direct losses (destruction of buildings and infrastructure) and indirect losses (resulting from the interruption of production and broader economic disruption). As of 2025, based on an analysis of key global economic indicators reflecting the consequences of major earthquakes worldwide, particular attention has been given to cases in Italy, Myanmar, Türkiye, Syria, Japan, China, New Zealand, and Nepal, which is of significant importance [6, 7, 8].

In Europe, Italy is among the most seismically active countries. Over the past two centuries, earthquakes have caused approximately 160,000 fatalities, substantial economic losses, and irreversible damage to cultural and historical heritage. For example, the reconstruction costs following the L’Aquila (2009), Emilia (2012), and Central Italy (2016) earthquakes are estimated at approximately €45 billion, while cumulative expenditures over the last 50 years have reached around €180 billion [5].

According to a recent World Bank report, a magnitude 7.7 earthquake that struck Myanmar in March 2025 caused severe damage, further negatively affecting businesses operating under challenging conditions and the livelihoods of the population. The Myanmar Economic Monitor (MEM) projects a 2.5 percent contraction in GDP for the 2025–2026 fiscal year, largely attributed to the earthquake. Direct damage to infrastructure and property is estimated at USD 11 billion, equivalent to nearly 14 percent of the country’s GDP. The disaster affected over 17 million people in the regions of Mandalay, Sagaing, Bago, Nay Pyi Taw Union Territory, and Magway, of whom approximately 9 million were severely impacted [6].

On 6 February 2023, a series of strong earthquakes (magnitudes 7.8 and 7.5) struck southeastern Turkey, marking one of the most destructive natural disasters in the country’s history. The epicenter was located near Kahramanmaraşh, causing widespread destruction in the provinces of Hatay, Gaziantep, Adıyaman, Malatya, and several others. Preliminary estimates put the direct material damage at approximately USD 34.2 billion. However, due to extensive damage to housing stock, social facilities, industrial enterprises, transportation networks, and engineering infrastructure, the total reconstruction and full recovery costs are expected to exceed USD 100 billion. The process of mitigating earthquake consequences requires not only rebuilding structures but also providing temporary housing for millions, resuming production activities, and ensuring uninterrupted social services, all of which demand substantial financial resources. This case clearly demonstrates that economic losses resulting from natural disasters often extend far beyond direct damage, multiplying several times during the long-term recovery phase [6].

The massive earthquakes that struck southeastern Turkey in February 2023 also caused unprecedented economic damage in northern Syria. These earthquakes, particularly the main shocks of magnitudes 7.8 and 7.5, dealt a severe blow to the Syrian economy. According to World Bank reports, the total estimated damage amounted to USD 5.1 billion, representing nearly 10 percent of the country’s war-affected gross domestic product (GDP). The largest portion of the losses was concentrated in the residential sector, accounting for approximately USD 2.5 billion, as tens of thousands of buildings were completely destroyed in the provinces of Aleppo, Idlib, Latakia, and Hama. Thousands of families in the affected areas were left homeless. Additionally, significant damage was inflicted on critical cultural heritage sites, such as the Citadel of Aleppo, negatively affecting the tourism sector. Infrastructure and transportation systems were also severely impacted, with roads, bridges, and utility networks suffering around USD 0.9 billion in damages [7].

The economic consequences extended far beyond the destruction of buildings, profoundly affecting the country’s overall economic system. By the end of the year, the earthquake contributed to an additional 5.5 percent contraction in GDP. Sharp increases in food and construction material prices led to rising inflation, and the disaster exacerbated poverty, leaving millions-already struggling due to ongoing conflict-in urgent need of humanitarian assistance. According to World Bank estimates, a total investment of USD 7.9 billion would be required to fully restore the country [7].

On 11 March 2011, one of the most catastrophic natural disasters in Japanese and human history occurred. The magnitude 9.0 earthquake originating in the Pacific Ocean, caused unprecedented destructive impacts in northeastern Japan. The resulting massive tsunami waves generated by the earthquake submerged coastal areas within minutes, completely destroying thousands of settlements, industrial zones, and critical infrastructure. Official and international assessments estimate the total economic damage caused by this natural disaster is estimated at approximately USD 360 billion, making it the costliest natural disaster inhuman history. The losses were not limited to the residential buildings, roads, bridges, ports, and industrial facilities. The earthquake and tsunami also disrupted vital energy, logistics, and manufacturing systems, which are crucial for Japan’s high-tech economy [8].

One of the most severe consequences was the nuclear accident at the Fukushima Daiichi Nuclear Power Plant, caused by the failure of electricity supply and cooling systems caused the reactors to overheat, leading to the release of radioactive materials into the environment. This incident not only affected Japan but also prompted a global reassessment of nuclear energy safety, affecting not only Japan but also nuclear policies worldwide. The processes of isolating the plant, controlling radiation spread, evacuating the population, and decontaminating the affected areas required many years and substantial financial resources. The disaster also had significant global economic repercussions. As Japan is one of the world’s largest technological and industrial centers, disruptions in automobile manufacturing, electronics, microchips, and industrial equipment production caused serious interruptions in international supply chains. This case clearly demonstrates that modern natural disasters can have far-reaching transnational economic impacts, not merely local ones [8].

On 1 January 2024, during the New Year holiday, a strong earthquake of magnitude 7.6 struck Ishikawa Prefecture and Noto Peninsula in Japan, becoming one of the most severe economic shocks for the country in the past decade. According to official data released by the Cabinet of Japan, the direct economic damage caused by this disaster is estimated to range from 1.1 trillion to 2.6 trillion yen, equivalent to approximately USD 17.6 billion to 28 billion. These figures confirm that, in terms of destructive scale, this earthquake represents one of the largest events in Japan since the 2011 Great East Japan Earthquake. The majority of the destruction was concentrated in the residential sector, transport infrastructure, and coastal port facilities. In particular, in Ishikawa Prefecture, thousands of houses were either completely destroyed or rendered uninhabitable. Cracks and landslides on roads cut off many settlements from external access. Damage to port infrastructure caused significant harm to the local economy, which is heavily reliant on fishing and maritime trade [7].

On 12 May 2008, the 7.9-magnitude Wenchuan earthquake struck Sichuan Province, China, becoming one of the most destructive and economically costly natural disasters in the country’s modern history. The direct economic damage caused by this disaster is estimated at approximately USD 150 billion, equivalent to nearly 4 percent of China’s GDP at that time. The earthquake was so powerful that it was felt not only in the epicentral region but also in distant megacities such as Beijing and Shanghai, as well as in neighboring countries. The scale of destruction was extensive: over 5 million buildings were completely destroyed, and more than 21 million residential units were damaged, leaving over 5 million people homeless.From an industrial perspective, Sichuan is an important center of agriculture and heavy industry in China. As a result, thousands of factories and production facilities experienced significant disruptions, further compounding the economic impact of the disaster [9].

On 22 February 2011, the earthquake that struck Christchurch, New Zealand, became one of the most illustrative examples demonstrating that the economic damage of natural disasters is not solely dependent on magnitude. Although its magnitude was 6.3, lower than that of other major earthquakes, the epicenter was located extremely close to the city center (only 10 km away) and at a very shallow depth (5 km), which amplified its destructive power several times. As a result, the total damage to urban infrastructure was estimated at approximately USD 40 billion, accounting for nearly 20 percent of New Zealand’s GDP at that time. The primary reason for such high economic losses was the widespread destruction of buildings in the central business district, including historic structures and multi-story constructions. Over 70 percent of the buildings in the city center were rendered unusable and had to be demolished, causing thousands of businesses and service sectors to cease operations entirely. For insurance companies, this event became one of the most expensive insurance events in history, as the compensation payouts had a significant impact on the national financial system. The process of economic recovery was extremely complex and prolonged. The New Zealand government established special agencies, such as the “Christchurch Rebuild Authority”, dedicating over a decade and substantial resources to the city’s reconstruction. Additionally, the phenomenon of soil liquefaction observed in the city during the earthquake (where water-saturated sandy or fine-grained soils lose strength and behave like a liquid) rendered entire residential areas unsafe, which were subsequently designated as “red zones”. This disaster slowed New Zealand’s economic growth for several years and led to a sharp increase in construction costs nationwide. As of 2025, although the city’s economy has fully recovered, the financial repercussions of this disaster remain one of the most significant points in New Zealand’s modern economic history [6].

On 25 April 2015, the 7.8-magnitude “Gorkha” earthquake struck Nepal, causing significant economic damage to a country that was among the least developed in the world. The epicenter was located near the capital, Kathmandu, and the earthquake’s effects were felt across the entire country. The total estimated economic loss reached approximately USD 7 billion, representing over 30 percent of Nepal’s GDP at that time and setting the country’s economy back several decades. The most severe economic impact was felt in Nepal’s key sectors: tourism and cultural heritage. Historic temples, towers, and monuments in the Kathmandu Valley, which are listed as UNESCO World Heritage Sites, were severely damaged, causing irreversible losses to the nation’s cultural legacy and to tourism-the primary source of foreign exchange. Thousands of hotels, mountain tourism facilities, and lodges for climbers were rendered inoperable, depriving hundreds of thousands of people of their livelihoods. Agriculture and the mountain mining industry also suffered significant damage. Landslides buried entire villages, livestock, and farmland under soil, disrupting local production and income. According to “Rapid Needs Assessment” data conducted by the Nepalese government and international organizations, nearly 1 million people fell back below the poverty line as a direct consequence of the disaster. Nepal’s mountainous terrain further amplified reconstruction costs, making recovery even more challenging. Even by 2025, the Nepalese economy has not fully recovered from the external debts and infrastructural losses caused by this earthquake. Substantial investments are still required to restore the tourism sector to its former level of attractiveness [10].

Figure 1 illustrates the impact of economic losses caused by earthquakes in relation to the gross domestic product (GDP) of the affected countries.

Figure 1. Comparative analysis of economic losses as a share of GDP

Figure 2 presents the largest earthquakes in world history and their financial consequences.

Figure 2. Graphical analysis of economic losses.

Conclusions

 1. The analysis indicates that every 1 dollar invested in strengthening buildings and infrastructure can potentially save between 4 and 7 dollars in future reconstruction costs. Therefore, for developing countries, allocating at least 5–10% of the national budget to disaster risk reduction and the reinforcement of existing structures should be considered a strategic priority. This approach not only reduces expected losses but also shortens the post-disaster economic recovery period.

 2. By 2025, AI-based seismic risk assessment systems have become an integral part of economic planning. As a strategic recommendation, it is proposed to implement real-time monitoring systems in major industrial zones. These systems can halt production processes seconds before an earthquake occurs, thereby minimizing technological damages and indirect economic losses (e.g., losses from fires or explosions).

 3. On a global scale, only 30–40% of economic losses caused by earthquakes are covered by insurance, while in developing countries this figure is below 5%. Expanding mandatory disaster insurance and establishing public-private insurance funds can redirect reconstruction costs from national budgets to external financial markets. This also helps maintain macroeconomic stability during disaster periods.

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