Economic Outlook for Southeast Asia, China and India 2025

Overview

Emerging Asia remains resilient but is increasingly exposed to disasters

Growth in countries in Emerging Asia, comprising the ASEAN-11 (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, and Viet Nam) along with the People’s Republic of China (hereafter “China”) and India, is expected to remain resilient in the near-term, supported by robust domestic demand, and continuing to account for the largest part of global growth amid a changing global environment (OECD, 2025[1]). Robust private consumption in most countries and ongoing public investment in some economies remain key growth drivers, along with supportive macroeconomic policies and easier financial conditions. However, this growth outlook is still subject to risks including policy uncertainty related to US tariff rates and broader global trade tensions. Further challenges include climate and disaster-related shocks, which are especially relevant for many Emerging Asian economies.

Indeed, Emerging Asian countries are increasingly exposed to various types of disasters1, with the severity and frequency of such events continuing to escalate in recent years (Figure 1 and Figure 2). Floods are generally the biggest concern, although certain countries such as the Philippines and Viet Nam are more exposed to tropical storms, while China and Indonesia face a relatively higher risk of earthquakes.

Figure 1. Total of disaster-related damage among Emerging Asian countries (1980-2024)

Note: The EM-DAT database does not record significant disaster events for Singapore and Brunei Darussalam.

Source: EM-DAT (2025[2]), Emergency Events Database.

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Figure 2. Disaster occurrences in Emerging Asia by country and type, 1950-2024

Note: The EM-DAT database does not record significant disaster events for Singapore and Brunei Darussalam.

Source: EM-DAT (2025[2]), Emergency Events Database.

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Disaster risk financing is an increasingly important tool to manage disaster risk

Disaster Risk Finance (DRF) is becoming more prominent in Emerging Asia as governments must cope with disasters’ rising frequency and costs (ASEAN, 2025[3]). To enhance financial resilience to disaster impacts, a comprehensive framework will be needed (OECD, 2022[4]). A comprehensive framework should include identifying, assessing and reporting climate- and disaster-related risks and their financial implications, mitigating financial losses from climate- and disaster-risks by investing in risk reduction and adaptation, as well as preparing integrated multipronged government financial strategies (OECD, 2022[4]).

Countries need to adopt a multifaceted DRF strategy, that combines risk retention and risk transfer, while DRF should combine a number of ex-ante and ex-post financing options. Ex-ante instruments (e.g. insurance) are pre-arranged measures to provide immediate access to funds once a disaster strikes. Ex-post measures, on the other hand (e.g. budget reallocation) are mobilised in the aftermath of an event to support recovery and reconstruction.

In most countries across Emerging Asia and the OECD, ex-post mechanisms are widely used, particularly budget reallocations. Many countries in Emerging Asia also resort to international assistance. At the same time, countries in the region are gradually shifting towards more ex-ante (arranged before a shock) and market-based instruments. Indonesia, for instance, has operationalised its national Pooling Fund for Disasters (PFB), institutionalising pre-arranged liquidity (World Bank, 2025[5]). The Philippines has advanced the use of Catastrophe Deferred Drawdown Options (Cat-DDOs) and pioneered parametric insurance as sovereign protection tools (World Bank, 2021[6]). Thailand has launched a national Insurance and Risk Finance Roadmap to diversify its financial protection instruments (UNDP, 2024[7]). Thailand and Malaysia have also begun exploring parametric and microinsurance products. Viet Nam has piloted agricultural insurance schemes to extend financial protection to farmers (Pham and Dao, 2017[8]).

Key priorities for strengthening disaster risk financing in Emerging Asia

Strengthening regulatory frameworks and institutional capacity

Fragmented and outdated legal and regulatory frameworks limit the use of modern DRF tools. Moreover, insufficiently harmonised legislation leads to inconsistent budget execution and unclear accountability. It is thus important to align and co-ordinate DRF legislation with national public financial management systems; modernise both disaster and public finance laws while creating legal mandates for risk-layered tools; and formulate appropriate budget frameworks for disasters.

DRF responsibilities in countries in the region are often allocated among multiple agencies throughout various levels of government. Strengthening co-ordination between national and local governments is essential to ensure efficient and accountable DRF operations. Robust, up-to-date data systems as well as monitoring and evaluation are necessary to strengthen transparency and risk-informed disaster management.

Facilitating and broadening DRF policy options

An effective disaster preparation and response requires a holistic and diverse DRF approach. Insurance is one of the most important DRF tools, and the use of parametric insurance is gradually increasing. Although the use of insurance schemes to cover disaster risks has expanded in Emerging Asia in recent years, the disparity between total economic losses and insured losses is still large. Catastrophe bonds can offer a potentially useful financing tool but require certain foundational conditions, including measurement infrastructure, robust catastrophe risk models, reliable data quality, specialised expertise, minimised basis risk, and a broader investor base (Atamuratova et al., 2014[9]; OECD, 2024[10]). Monetary and macroeconomic policies, including foreign reserve policy, also serve as important tools for disaster response in the region. Considering the advantages and limitations of each policy tools, determining the best policy mix is key for effective disaster risk management (Molnar-Tanaka and Sakamoto, 2025[11]). In addition, the choice and combination of policy options will depend not only on economic conditions, such as capital market development and access to debt markets, but also the types and magnitudes of disruptions caused by disasters.

Enhancing disaster risk finance education

Even well-designed DRF mechanisms cannot achieve their objectives if they are poorly understood or underutilised. Improving disaster risk finance education is therefore crucial. Governments play an important role in enhancing disaster risk finance education through the education system. However, disaster risk finance literacy should be expanded beyond schooling to reach various audiences such as public officials, insurance practitioners and the general public (ADB, 2022[12]; UNDP, 2023[13]). Moreover, since Emerging Asian countries display wide cultural and geographical diversity, disaster risk finance literacy policies should be tailored, reflecting the economic and social structures of each country. Leveraging digital platforms surrounding DRF is also vital to expand the reach and accessibility of DRF literacy initiatives. Indeed, the region has already developed several initiatives (Table 1).

Table 1. Examples of initiatives of disaster risk finance education

Country	Initiative (Start year)	Target group	Notes
Cambodia	Crop Insurance Literacy and Awareness Campaign (2018)	Small-scale farmers	Provides training and farmer-facing materials on crop-insurance coverage, premiums and claims to support informed financial-risk management.
India	PMFBY – Mega Awareness Campaigns on Crop Insurance (from 2016)	Smallholder farmers	Large-scale campaigns to explain insured perils, enrolment, premium subsidies, and claim procedures under Pradhan Mantri Fasal Bima Yojana.
Indonesia	Grand Design for the Development of Microinsurance – Consumer-Education Component (2013)	Low-income households, MSMEs and rural communities	Incorporates consumer-education elements to improve understanding of microinsurance products, including those for disaster-related risks.
Philippines	Roadmap to Financial Literacy on Microinsurance (2011)	Low-income households and microinsurance clients	National framework defining key financial-literacy messages on risk pooling, premiums, claims, and the role of microinsurance in managing disaster shocks.
Viet Nam	Crop Insurance Literacy and Awareness Campaign (2018)	Smallholder farmers	Training and materials to strengthen understanding of crop-insurance products and their role in climate and disaster-risk management; implemented in Viet Nam and Cambodia.

Note: Examples reflect publicly available descriptions of national financial-literacy education initiatives.

Source: (OECD, 2024[10]; ADB, 2022[12]; World Bank, 2021[14]; IRDAI, 2016[15]; Munich Re Foundation, 2014[16]; Insurance Commission of the Philippines and GIZ, 2011[17]; UNDP, 2023[13]).

Strengthening regional co-operation

While multiple regional initiatives are already in place, countries in the region still have room for strengthening their co-operation. The ASEAN Agreement on Disaster Management and Emergency Response (AADMER) provides a legally binding framework around disaster preparedness. The AADMER Work Programme furthers these commitments by creating regional actions for disaster preparation, response, and resilience building. The ASEAN Disaster Risk Finance and Insurance (DRFI) Roadmap gives guidance on financial protection instruments and capacity building. In addition, the more recent Southeast Asia Disaster Risk Insurance Facility (SEADRIF) provides regional risk pooling, including parametric flood insurance (Table 2). Strengthening the alignment between DRF strategies and these regional frameworks in data sharing, modelling, capacity development and pooled financing is important to enhance resilience in Emerging Asia (ASEAN, 2020[18]; SEADRIF, 2024[19]). While these mechanisms can enhance the financial resilience of the region during disasters, the use of risk-sharing pools between countries is still limited. Advancing the adoption and expansion of these initiatives would help make disaster risk mitigation efforts more effective.

Table 2. Comparison of selected regional sovereign catastrophe risk pools

Initiative	CCRIF (Caribbean Catastrophe Risk Insurance Facility)	PCRAFI (Pacific Catastrophe Risk Assessment and Financing Initiative)	SEADRIF (Southeast Asia Disaster Risk Insurance Facility)
Company name	CCRIF SPC (Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company)	PCRIC (Pacific Catastrophe Risk Insurance Company)	SEADRIF Insurance Company
Form of insurance	Modelled loss parametric	Modelled loss parametric	Modelled loss parametric
Number of countries	26 members (19 Caribbean countries, 4 Central American countries, 3 Caribbean companies)	7 member countries	8 member countries (7 Southeast Asian countries and Japan)
Perils covered	Tropical cyclone, earthquake, excess rainfall	Tropical cyclone, earthquake (including tsunami), excess rainfall, drought	Flood
Initiative inception date	2007	2007	2018
Company establishment date	2014	2016	2019
Pay-out process	Pay-out made within 14 days	Pay-out made within 10 days	Pay-out made within 10 business days for parametric component and within 5 business days for finite risk component

Note: PCRIC evolved from the pilot programme developed under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), an initiative launched in 2007. Company establishment date of CCRIF refers to the date of restructuring of the facility into a segregated portfolio company (SPC). Initiative inception date of SEADRIF refers to the signing date of the Memorandum of Understanding (MoU) for the establishment of SEADRIF by Cambodia, Indonesia, Japan, Lao PDR, Myanmar, and Singapore.

Source: (Molnar-Tanaka and Wu, 2025[20]).

References

[12] ADB (2022), Financial Resilience Against Disasters: Lessons from Asia, Asian Development Bank, https://www.adb.org/publications/financial-resilience-against-disasters.

[3] ASEAN (2025), Disaster-Risk Financing and Insurance in Southeast Asia: Trends, Challenges, and Strategic Approaches, ASEAN Secretariat, https://asean.org/wp-content/uploads/2025/04/20240401_Trend-Report_DM-12-2025.pdf.

[18] ASEAN (2020), Agreement on Disaster Management and Emergency Response (AADMER) work programme, ASEAN Secretariat, https://agreement.asean.org/media/download/20220330063139.pdf.

[9] Atamuratova, S. et al. (2014), Financial protection against natural disasters : From products to comprehensive strategies - an operational framework for disaster risk financing and insurance, World Bank Group, Washington, DC, http://documents.worldbank.org/curated/en/523011468129274796.

[2] EM-DAT (2025), Emergency Events Database, Centre for Research on the Epidemiology of Disasters (CRED), https://www.emdat.be/.

[17] Insurance Commission of the Philippines and GIZ (2011), Roadmap to Financial Literacy on Microinsurance, Insurance Commission of the Philippines and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Manila, https://dynawealth.com.ph/resources/A-Roadmap-to-Financial-Literacy-on-Microinsurance.pdf.

[15] IRDAI (2016), Pradhan Mantri Fasal Bima Yojana: Operational Guidelines, Insurance Regulatory and Development Authority of India, New Delhi.

[11] Molnar-Tanaka, K. and H. Sakamoto (2025), “Financing the costs of disasters: Catastrophe bonds or taxation?”, OECD Development Centre Working Papers, No. 354, OECD Publishing, Paris, https://doi.org/10.1787/f652ad80-en.

[20] Molnar-Tanaka, K. and Y. Wu (2025), “Disaster risk-sharing pools and multi-country catastrophe bonds in Southeast Asia”, OECD Development Centre Working Papers, No. 356, OECD Publishing, Paris, https://doi.org/10.1787/5add24ef-en.

[16] Munich Re Foundation (2014), 9th International Microinsurance Conference 2013: Indonesia Country Report, Munich Re Foundation and Microinsurance Network, Munich.

[1] OECD (2025), OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities, OECD Publishing, Paris, https://doi.org/10.1787/9f653ca1-en.

[10] OECD (2024), Economic Outlook for Southeast Asia, China and India 2024: Developing amid Disaster Risks, OECD Publishing, Paris, https://doi.org/10.1787/3bbe7dfe-en.

[4] OECD (2022), Building Financial Resilience to Climate Impacts: A Framework for Governments to Manage the Risks of Losses and Damages, OECD Publishing, Paris, https://doi.org/10.1787/9e2e1412-en.

[8] Pham, T. and T. Dao (2017), “Agricultural insurance pilot in Viet Nam: Protecting farmers from climate risks”, Journal of Economics and Development, Vol. 19/3, pp. 5-22, https://doi.org/10.33301/2017.19.03.01.

[19] SEADRIF (2024), SEADRIF Annual Report 2024, Southeast Asia Disaster-Risk Insurance Facility, Singapore, https://seadrif.org/annual-report/.

[7] UNDP (2024), Insurance and Risk Finance for Thailand, UNDP Insurance and Risk Finance Facility, https://www.undp.org/sites/g/files/zskgke326/files/2025-01/irff-roadmap_en_22122024.pdf.

[13] UNDP (2023), Inclusive insurance and risk financing in Thailand: Snapshot and way forward 2023, UNDP Insurance and Risk Finance Facility, https://www.undp.org/sites/g/files/zskgke326/files/2023-03/Thailand%20insurance%20diagnostics%20summary.pdf.

[5] World Bank (2025), Indonesia Disaster-Risk Finance and Insurance Project Appraisal Document, Indonesia – Disaster-Risk Finance and Insurance Project, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/316601611543685552/indonesia-disaster-risk-finance-and-insurance-project.

[6] World Bank (2021), Philippines Cat-DDO and Parametric Insurance Progress, https://documents.worldbank.org/en/publication/documents-report/documentdetail/789821607382813101.

[14] World Bank (2021), Strengthening financial protection against disasters in the Philippines, World Bank Group.

Note

← 1.  The term “disaster” can be used broadly to refer to a wide range of events, including conflicts, terrorism, and other man-mad shocks. In this chapter, however, the term refers specifically to events induced by environmental or natural phenomena such as earthquakes, floods, typhoons, and other climate and weather-related hazards.