Jakarta — Natural disasters and terrorism are negatively associated with economic growth in six ASEAN countries: Indonesia, Malaysia, Thailand, Vietnam, the Philippines, and Cambodia. This finding comes from research by Dwi Mahroji, Rita Yuni Mulyanti, and Setia Dharma, who analyzed economic data from the six countries between 2010 and 2024. Using panel data and a Fixed Effect Model, the study found that both types of shocks were associated with lower economic growth in the subsequent period, with terrorism showing a comparatively stronger negative association.
Economic growth is one of the key indicators of national development and prosperity. Sustained growth can increase household income, expand employment opportunities, reduce poverty, and support infrastructure and public services. However, a country’s ability to maintain economic growth depends not only on conventional economic policies. Environmental and security shocks can also place significant pressure on economic activity.
ASEAN is one of the world’s dynamic economic regions. Industrialization, foreign investment, regional trade, and demographic advantages have supported economic development across several member states. At the same time, the region remains highly exposed to natural disasters and security-related risks.
Natural disasters represent one of the major threats. Several ASEAN countries are located within the Pacific Ring of Fire and face substantial exposure to climate-related hazards. Earthquakes, volcanic eruptions, floods, tropical storms, droughts, and landslides can destroy infrastructure and productive assets. These disruptions can halt production, interrupt supply chains, reduce agricultural output, and increase government spending on emergency response and reconstruction.
Security problems can also generate economic costs. Terrorism can weaken investor confidence, reduce tourism, disrupt business operations, increase security expenditures, and create greater economic uncertainty. Prolonged insecurity can discourage companies from investing or expanding, while governments may have to redirect resources from productive sectors toward security operations.
The study by Mahroji, Mulyanti, and Dharma addresses a gap in previous research, which has often examined natural disasters or terrorism separately. By incorporating both factors into the same model, the researchers sought to provide a broader understanding of how environmental and security risks are associated with economic growth in ASEAN.
Data from Six ASEAN Countries
The researchers employed a quantitative approach using balanced panel data from six countries between 2010 and 2024. The dataset consisted of 90 country-year observations. The countries included Indonesia, Malaysia, Cambodia, the Philippines, Thailand, and Vietnam. The selection was based on the availability and consistency of data on economic growth, natural disasters, and terrorism.
Economic growth data were obtained from the World Bank’s World Development Indicators. Terrorism data came from the Institute for Economics & Peace, particularly the Global Terrorism Index and related terrorism datasets. Natural disaster data were obtained from internationally recognized disaster databases and cross-checked with ASEANstats and other international sources.
Economic growth was measured using the annual percentage growth of real Gross Domestic Product (GDP). Natural disasters were measured by the annual number of recorded disaster events, while terrorism was measured by the number of recorded terrorist incidents. The researchers applied a one-period lag, meaning that natural disasters and terrorism in the previous period were examined in relation to economic growth in the following period.
The researchers tested several panel-data models, including the Common Effect Model, Fixed Effect Model, and Random Effect Model. Both the Chow and Hausman tests produced probability values of 0.0000, supporting the use of the Fixed Effect Model. This model accounts for country-specific characteristics that remain relatively constant over time.
Natural Disasters Are Linked to Lower Growth
The results show that natural disasters have an estimated coefficient of −0.0138664. The negative coefficient indicates an inverse relationship between natural disaster occurrence in the preceding period and economic growth in the following period. Under the study’s log-log specification, a 1 percent increase in natural disaster occurrence in the previous period is associated with an approximately 0.0139 percent decline in economic growth in the subsequent period, holding other factors constant.
This relationship can be explained by damage to infrastructure, productive assets, agricultural and industrial facilities, as well as disruptions to transportation and supply chains. When productive capacity declines, economic recovery can take time, meaning that the effects of a disaster may extend beyond the year in which the event occurs.
However, the researchers do not suggest that every disaster has the same economic impact. The effects can vary according to the type of disaster, severity, timing, and sectors exposed to the shock. Therefore, the negative coefficient should be interpreted as an average relationship across the countries and period examined in the study.
Terrorism Shows a Stronger Negative Association
Terrorism has an estimated coefficient of −0.0787206. This result indicates that greater terrorism activity in the previous period is associated with lower economic growth in the subsequent period. Under the study’s log-log specification, a 1 percent increase in terrorism in the preceding period is associated with an approximately 0.0787 percent reduction in economic growth in the following period.
The absolute value of the terrorism coefficient is larger than the coefficient for natural disasters. Therefore, within the estimated model, terrorism has a comparatively stronger negative association with economic growth than natural disasters. The researchers caution, however, that the two coefficients should not be interpreted as a direct comparison of total economic losses because the variables have different measurement scales and underlying data characteristics.
Terrorism can affect economic performance through several channels. Security uncertainty can make companies more cautious about investment and expansion. Tourism may decline, business operations can be disrupted, and security costs can rise. The effects may also persist after terrorist incidents because households and businesses can adjust investment, consumption, and location decisions in response to changing perceptions of security risk.
Disaster and Security Resilience Matter for Economic Policy
Overall, the study finds that both natural disasters and terrorism are negatively associated with subsequent economic growth in the six ASEAN countries. Natural disasters have an estimated coefficient of −0.0138664, while terrorism has a coefficient of −0.0787206. The findings highlight the importance of economic resilience in responding to both environmental and security shocks.
The researchers recommend strengthening disaster-risk reduction through resilient infrastructure, early-warning systems, emergency preparedness, and effective reconstruction mechanisms. These measures can help reduce the duration and magnitude of economic losses following disasters.
On the security side, stronger counter-terrorism institutions and regional security cooperation are also important. Protecting economic infrastructure and maintaining a stable business environment can help preserve investor confidence and support economic activity. Security policy, therefore, should not be treated as completely separate from economic development strategies.
The study also emphasizes the importance of delayed effects. Rebuilding infrastructure, restoring productive capacity, and recovering employment and household income after a disaster can take several periods. Similar effects may occur following terrorism because economic actors need time to adjust their decisions to changes in perceived security risks.
Ultimately, the research by Dwi Mahroji, Rita Yuni Mulyanti, and Setia Dharma demonstrates that economic growth in ASEAN is shaped by more than conventional economic factors. A country’s ability to withstand natural disasters and maintain security is also an important component of economic resilience. For ASEAN, stronger disaster-risk management and regional security policies can play an important role in maintaining stable and sustainable economic growth.
Authors
Dwi Mahroji — Universitas Mitra Bangsa.
Rita Yuni Mulyanti — Universitas Teknologi Muhammadiyah Jakarta.
Setia Dharma — Universitas Teknologi Muhammadiyah Jakarta.
Research Source
Article Title: Economic Growth under Threat: The Effects of Natural Disasters and Terrorism in Six ASEAN Countries
Journal: East Asian Journal of Multidisciplinary Research (EAJMR), Vol. 5 No. 8, 2026, pp. 3555–3570.
DOI: https://doi.org/10.55927/eajmr.v5i8.287
Journal Website: https://journaleajmr.my.id/index.php/eajmr
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