Floods, water-related disasters could cost global economy $5.6tr

Tariq Butt/ Agencies

Worsening droughts, storms and torrential rain in some of the world’s largest economies could cause $5.6 trillion in losses to the global economy by 2050, according to a report released on Monday.

This year heavy rains have triggered floods that inundated cities in China and South Korea and disrupted water and electricity supply in India, while drought has put farmers’ harvests at risk across Europe.

Such disasters are costing economies hundreds of billions of dollars. Last year’s extreme droughts, floods and storms led to global losses of more than $224 billion, according to the Emergency Events Database maintained by the Brussels-based Centre for Research on the Epidemiology of Disasters.

But as climate change fuels more intense rainfall, flooding and drought in coming decades, these costs are set to soar, warns the report by engineering and environmental consultancy firm GHD.

Water — when there’s too much or too little — can “be the most destructive force that a community can experience,” said Don Holland, who leads GHD’s Canadian water market programme.

GHD assessed the water risks in seven countries representing varied economic and climatic conditions: the United States, China, Canada, the United Kingdom, the Philippines, the United Arab Emirates and Australia. Using global insurance data and scientific studies on how extreme events can affect different sectors, the team estimated the amount of losses countries face in terms of immediate costs as well as to the overall economy.

In the United States, the world’s biggest economy, losses could total $3.7 trillion by 2050, with US gross domestic product shrinking by about 0.5% each year up until then. China, the world’s No. 2 economy, faces cumulative losses of around $1.1 trillion by mid-century.

Of the five business sectors most vital to the global economy, manufacturing and distribution would be hit hardest by disasters costing $4.2 trillion as water scarcity disrupts production while storms and floods destroy infrastructure and inventory.

The agricultural sector, vulnerable to both drought and extreme rainfall, could see $332 billion in losses by 2050. Other sectors facing major challenges are retail, banking and energy.

At this year’s World Economic Forum in Davos, Switzerland, a global group of experts launched  a new commission to research the economics of water that aims to advise policymakers on water management.

We must “transform how we govern water and the climate together,” said commission co-chair Tharman Shanmugaratnam. “The costs of doing so are not trivial, but they are dwarfed by the costs of letting extreme weather wreak havoc.”

Pakistan’s $10b economic losses: The initial economic losses from floods in Pakistan could be at least $10 billion, Planning Minister Ahsan Iqbal told Reuters in an interview on Monday.

“I think it is going to be huge. So far, (a) very early, preliminary estimate is that it is big, it is higher than $10 billion,” he said.

Unprecedented and historical flash floods due to abnormal monsoon rains have washed away roads, crops, infrastructure and bridges, killing at least 1,000 people in recent weeks.

Meanwhile, Finance Minister Miftah Ismail says the flash floods have inflicted a loss of at least $10 billion on different sectors of the country’s struggling economy. “These are the initial assessments that might escalate after conducting surveys on the ground. I do not have the details of the losses faced by each sector of the economy at the moment,” he said.

About donors having been taken into confidence on the initial assessment of damage, the minister replied in the negative.

Other officials said Islamabad would first seek financial assistance from the international community and then it might assess the damages separately or jointly with the donors to work out the exact figures, but first of all the government would focus on all-out relief efforts in order to rescue the victims.

In the 2005 earthquake and 2010 floods, Pakistan and donors assessed the losses caused to different sectors of the economy and then the donors helped Islamabad during the reconstruction phase after relief and rehabilitation.

Now the same strategy would be adopted. Initial assessments show that more than 1,000 people and millions of livestock have died in different parts of the country besides damage to an untold number of houses, hotels and roods in major flood-hit areas of Punjab, Sindh, Balochistan and Khyber Pakhtunkhwa (KP).

Ismail says the Pakistan Tehreek-e-Insaf (PTI) has put the country’s economy at risk for politicking; hits back at PTI leaders and said they have lust for power.

Ismail said the PTI endangered Pakistan’s economy just for the sake of politics. “This is very saddening. You were not like this before but the PTI has left a very bad impact on you.”