It's official: El Niño slows global economy, mounts losses in trillions of dollars

The impact is borne by the poorest of nations in the tropics, says the study.
Ameya Paleja
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El Niño's economic impact

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Researchers at Dartmouth College in the U.S. have found that El Niño has far-reaching effects on the global economy, persisting for years after the event has occurred. The long-term costs of the warm ocean water band can be trillions in lost income, a paper published today said.

El Niño is the warm phase of the El Niño-Southern Oscillation (ENSO), which develops in the tropical regions of the Pacific Ocean. It is associated with changes in weather patterns, such as wetter and warmer winters on the West Coast and milder hurricane seasons in the Atlantic.

As the largest source of year-to-year variation in climate and weather around the world, the financial impact of El Niño must be taken into account when dealing with climate change. However, the long-term effects of El Niño had not been evaluated prior to this.

Long-term effects of El Niño

The last major El Niño was in 2016, which also set the record for the hottest year. In the following years, global warming has become a larger problem, and with the world exiting an extended La Niña, the colder counterpart of the oscillation, El Niño is set to make a comeback this year.

The far-reaching weather changes caused by El Niño are known to cause floods, droughts, a drop in fish populations as well as an increase in tropical diseases. The researchers at Dartmouth, however, wanted to put a number on the financial losses caused by the warm ocean band.

The researchers spent over two years analyzing the global economic activity following similar events between 1982-83 and 1997-98. They found that economic activity was slowed even five years after the event. The global economy slowed down by $4.1 trillion and $5.7 trillion dollars after El Niño events in the two years studied, respectively.

It's official: El Niño slows global economy, mounts losses in trillions of dollars
Strong El Niño can lead to severe droughts or devastating floods

In the U.S., the two events led to a drop in gross domestic product (GDP) by approximately three percent. However, the impact on tropical nations such as Peru and Indonesia was more pronounced and led to a decline of more than 10 percent, the study found.

"We can say with certainty that societies and economies absolutely do not just take a hit and recover," said Christopher Callahan, a doctoral candidate in geography at Dartmouth College who was involved in the study. The data collected by the team suggests that a downturn after El Niño could even last as long as 14 years.

For the 2023 El Niño, Callahan predicted: "a major economic toll that depresses economic growth in tropical countries for potentially up to a decade. The result could be trillions of dollars in productivity lost globally".

The study was published in the journal Science.

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