Water problems cost the world $5,000 billion

Severe droughts, storms and torrential rains in some of the world’s largest economies could cost the global economy $5,600 billion by mid-century. This is according to a study by consultancy GHD Group, which examined the risks of the problem in seven countries with different economic and climatic conditions.

This year, heavy rains have flooded cities in China and South Korea and disrupted India’s water and electricity supplies, while droughts have threatened crops for farmers across Europe. Such disasters cost the economy hundreds of billions of dollars.

Increasing costs

Last year, severe droughts, floods and storms caused $224 billion in losses worldwide. “But these costs will rise further as climate change leads to more rainfall, floods and droughts in the coming decades,” the report warns.

“Whether in excess or in short supply, water can be the most destructive force a society experiences,” the researchers warn. The GHD GroupHe examined potential developments in the United States, China, Canada, the United Kingdom, the Philippines, the United Arab Emirates and Australia.

In the United States, the world’s largest economy, losses could reach $3.7 trillion by the middle of this century. During that period, U.S. GDP shrank by about 0.5 percent each year. China will suffer a cumulative loss of about $1,100 billion over the same period.

Manufacturing and distribution

Of the five business sectors that have the biggest impact on the global economy, manufacturing and distribution will be hit the hardest. Disasters cost the sector $4,200 billion, as water shortages can disrupt production and storms and floods can destroy infrastructure and supplies.

The agriculture sector, which is vulnerable to drought and heavy rains, could face losses of $332 billion by the middle of this century. Retail, banking and energy sectors will also face major challenges, the researchers suggest.

At this year’s World Economic Forum in Davos, Switzerland, a group of global experts launched a new panel to examine the economic impact of water. The purpose of the committee is to advise policy makers on water management.

“We need to find a different way to manage water and climate,” noted Dharman Shanmugaratnam, one of the group’s leaders. “These efforts incur substantial costs, but those costs are dwarfed by losses from extreme weather events.”

(jvdh)