The effect of flood disaster on construction sector’s GDP growth in Malaysia

• Main Authors: Shaari, Mai Syaheera M., Abd Karim, Mohd Zaini, Hasan Basri, Bakti
• Other Authors: Mat Noor, Ahmad Nizan
• Format: Book Section
• Published: Springer 2019
• Subjects: HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/26650/; http://doi.org/10.1007/978-981-10-8730-1_12

Flood disasters have incurred remarkable costs to humans and the economy. Floods affect not only the local but also the national and world economies. However, the impact of floods on the construction sector’s GDP growth in Malaysia is not known. The purpose of this chapter is to analyse the effects of flood disaster on the construction sector’s GDP growth in Malaysia using time series data for the period 1960–2013. In addition, the chapter also explores the existence of short-run and long-run relationships between the construction sector’s GDP growth and flood variables in the case of Malaysia. To achieve the objectives, the study employed the autoregressive distributed lag (ARDL) method and the error correction model (ECM) in examining the long-run and the short-run relationships, respectively. In addition, the augmented Dickey–Fuller, Phillips–Perron and Kwiatkowski–Phillips–Schmidt–Shin unit root tests were used to examine the stationarity of the series. The results show that flood size and flood damage influence the construction sector’s GDP growth the most in the short and long run, respectively. Several policy implications arise from the results. First, there is a need to develop a new method of construction so that the infrastructures and buildings are durable, as flood disasters cannot be prevented. Well-developed infrastructures and buildings are able to prevent massive damages in the long run. Furthermore, the construction sector should prepare sufficient stock of items such as basic metals to prevent temporary setback in the short run.