Droughts and Deficits
The Global Impacts of Droughts on Economic Growth
Across much of the world, water deficits are expected to become the new normal. With rising human populations and growing prosperity, water demand is growing exponentially.
Pollution, industrial development, agricultural intensification, land use change, and other damaging human activities are degrading and diminishing watersheds, rivers, and lakes.
Between 2014 and 2018, the Theewaterskloof reservoir, one of the largest water supply systems near Cape Town in South Africa, dropped to 27% of its full capacity. Credit: NASA
Between 2014 and 2018, the Theewaterskloof reservoir, one of the largest water supply systems near Cape Town in South Africa, dropped to 27% of its full capacity. Credit: NASA
The result is a water deficit, with stresses that will spread to new regions of the world and worsen in areas where water is already scarce.
Climate change is also expected to increase the risk of droughts and desertification in many at-risk regions of the world, particularly those with rapid population growth, vulnerable groups and food security challenges.
A new report, Droughts and Deficits: Summary Evidence of the Global Impact on Economic Growth, uses state-of the art empirical research to present new estimates of the effects of rainfall shocks and droughts on gross domestic product (GDP) growth.
Across much of the world, water deficits are expected to become the new normal. With rising human populations and growing prosperity, water demand is growing exponentially.
Pollution, industrial development, agricultural intensification, land use change, and other damaging human activities are degrading and diminishing watersheds, rivers, and lakes.
Between 2014 and 2018, the Theewaterskloof reservoir, one of the largest water supply systems near Cape Town in South Africa, dropped to 27% of its full capacity. Credit: NASA
Between 2014 and 2018, the Theewaterskloof reservoir, one of the largest water supply systems near Cape Town in South Africa, dropped to 27% of its full capacity. Credit: NASA
The result is a water deficit, with stresses that will spread to new regions of the world and worsen in areas where water is already scarce.
Climate change is also expected to increase the risk of droughts and desertification in many at-risk regions of the world, particularly those with rapid population growth, vulnerable groups and food security challenges.
A new report, Droughts and Deficits - Summary Evidence of the Global Impact on Economic Growth, uses state-of the art empirical research to present new estimates of the effects of rainfall shocks and droughts on gross domestic product (GDP).
Droughts Are Misery
in Slow Motion
Around 66% of the global population live in a water basin that encounters water stress for at least part of the year.
And even without further degradation of water resources, it is the world’s poorest and the driest regions of the world that face the most severe scarcity and water related challenges.
Climate change compounds these challenges by making rainfall more variable. Though future rainfall projections are uncertain, there is unanimity across climate change models that rainfall will become more erratic and extreme with rising temperatures.
There are already clear signs that rainfall variability has increased significantly over the past five decades.
Droughts exacerbate existing vulnerabilities
Farmers accompanying cows next to drought-impacted fields in Vietnam. Credit: Quang Nguyen Vinh
Farmers accompanying cows next to drought-impacted fields in Vietnam. Credit: Quang Nguyen Vinh
Women watering mukau sapplings in Kenya's arid Eastern Province. Credit: Flore de Preneuf / World Bank.
Women watering mukau sapplings in Kenya's arid Eastern Province. Credit: Flore de Preneuf / World Bank.
How Have Rainfall Shocks Affected the Economy Over Time?
Droughts and Deficits uses recent econometric methodologies to answer this question. Rainfall and water availability display considerable spatial variability that is almost two times greater than that of temperature.
In Southern Africa, a severe drought that started in 2018 caused decreased crop output across the region and put millions at risk of famine. Credit: Trent L. Schindler/NASA
In Southern Africa, a severe drought that started in 2018 caused decreased crop output across the region and put millions at risk of famine. Credit: Trent L. Schindler/NASA
The authors of the report conducted their analyses at a high degree of spatial disaggregation to capture the effects of rainfall variations on economic indicators of interest.
By examining the effects of water on a single aggregate measure -- economic growth -- the report finds that low-income countries and middle-income countries are considerably more vulnerable to dry shocks than are higher-income countries.
In these countries, poor rain means poor growth.
Rainfall deficits have a negative impact on GDP growth, with low- and middle-income countries in arid areas sustaining the highest relative losses. As the severity of a drought increases, so too does the impact on economic growth.
- In low- and middle-income countries, moderate drought reduces growth by about 0.39 percentage points, and extreme drought reduces growth by about 0.85 percentage points (average growth rate 2.19%).
- By contrast, in high-income countries, extreme droughts reduce growth by a little less than half the impact felt in developing countries.
Charcoal for sale, some in food aid bags, during the 2011 drought in Kenya. The tree-based fuel provides income for farmers when their crops fail.
Charcoal for sale, some in food aid bags, during the 2011 drought in Kenya. The tree-based fuel provides income for farmers when their crops fail.
The adverse effects on economic growth are therefore sharper in agriculture-dominated areas of the developing world. The higher losses reflect these countries’ greater dependence on agriculture, which is the sector most affected by rainfall disruptions.
The Economic Significance of Green Water
Cumulative rainfall in the recent past helps determine the growth impacts of a dry shock
Rainfall increases in previous years raise the levels of green water in the root zone of crops - also known as soil moisture - and can neutralize the harmful impacts from a dry shock. Conversely, if recent years were drier than normal, the headwinds on economic growth from dry rainfall shocks are considerably stronger.
Healthy forests and landscapes are one of the key channels through which green water is maintained
Forests and trees add moisture to the air and moisture in the soil, particularly in the root zones. Across local watersheds and even thousands of miles away, forests can alter the movement and availability of water by regulating flow, absorbing water when it is plentiful, and releasing it when it is scarce.
Image Credit: ESA–AOES Medialab Soil moisture plays an important role in agricultural monitoring, drought and flood forecasting, forest fire prediction, water supply management, and other natural resource activities. Soil moisture observations can forewarn of impending drought or flood conditions before other more standard indicators are triggered. Source: NOAA | NIDIS
Image Credit: ESA–AOES Medialab Soil moisture plays an important role in agricultural monitoring, drought and flood forecasting, forest fire prediction, water supply management, and other natural resource activities. Soil moisture observations can forewarn of impending drought or flood conditions before other more standard indicators are triggered. Source: NOAA | NIDIS
The dense canopy of trees provides a natural umbrella that traps rainwater, slowing the pace of rain and allowing it to enter the soil, while forest roots act as natural sponges, adding to soil moisture and recharging groundwater. Over time, forests slowly release that water, thus moderating downstream flows by lowering flooding, while improving dry season flow.
With proper management, forests, especially native forests, can help enhance the resilience of water supplies. Higher local and upstream forest cover can help buffer the growth impacts of dry shocks by almost half.
Cumulative rainfall in the recent past helps determine the growth impacts of a dry shock
Rainfall increases in previous years raise the levels of green water - also known as soil moisture - in the root zone of crops and can neutralize the harmful impacts from a dry shock. Conversely, if recent years were drier than normal, the headwinds on economic growth from dry rainfall shocks are considerably stronger.
Healthy forests and landscapes are one of the key channels through which green water is maintained
Forests and trees add moisture to the air and moisture in the soil, particularly in the root zones. Across local watersheds and even thousands of miles away, forests can alter the movement and availability of water by regulating flow, absorbing water when it is plentiful, and releasing it when it is scarce.
Image Credit: ESA–AOES Medialab Soil moisture plays an important role in agricultural monitoring, drought and flood forecasting, forest fire prediction, water supply management, and other natural resource activities. Soil moisture observations can forewarn of impending drought or flood conditions before other more standard indicators are triggered. Source: NOAA | NIDIS
Image Credit: ESA–AOES Medialab Soil moisture plays an important role in agricultural monitoring, drought and flood forecasting, forest fire prediction, water supply management, and other natural resource activities. Soil moisture observations can forewarn of impending drought or flood conditions before other more standard indicators are triggered. Source: NOAA | NIDIS
The dense canopy of trees provides a natural umbrella that traps rainwater, slowing the pace of rain and allowing it to enter the soil, while forest roots act as natural sponges, adding to soil moisture and recharging groundwater. Over time, forests slowly release that water, thus moderating downstream flows by lowering flooding, while improving dry season flow.
With proper management, forests, especially native forests, can help enhance the resilience of water supplies. Higher local and upstream forest cover can help buffer the growth impacts of dry shocks by almost half.
Making Drought-Resilience a Priority
The developing world has been ill-prepared to manage the risks and impacts of droughts over the past few decades. In many regions, climate change is expected to lead to only greater drought severity.
Without intervention, the global land area and population facing extreme droughts could more than double from 3% during 1976-2005 period, to 8% by the late 21st century.
Drought impacts have been unevenly distributed around the globe and vary significantly across and within countries. Such patterns also highlight the disproportionate losses that developing countries continue to face. This risk information can also be particularly valuable in enabling more effective responses to the increasing threats from climate change, for example by helping policy-makers to prioritize and spatially target interventions of greatest growth impact.
A closer look at the Horn of Africa
For example, in 2022, drought conditions in eastern Ethiopia, northern Kenya, and Somalia led the UN to warn that some 22 million people could be at risk of starvation.
The animations above depict soil moisture observations and forecasts. Reds depict areas where soil moisture was below average for the day, while blues reflect areas that were above average. Credit: NASA
The animations above depict soil moisture observations and forecasts. Reds depict areas where soil moisture was below average for the day, while blues reflect areas that were above average. Credit: NASA
The most severe drought in 70 years of threatens the Horn of Africa with famine. Source: NASA
The most severe drought in 70 years of threatens the Horn of Africa with famine. Source: NASA
The most severe drought in 70 years threatens the Horn of Africa with famine. Source: NASA
The most severe drought in 70 years threatens the Horn of Africa with famine. Source: NASA
Bringing drought resilience to scale
Due to these prolonged dry shocks, the world is on a path to even greater losses in economic growth and development gains. Without significant improvements to the way policy makers respond to and manage these events, we will be unable to tackle two of the major challenges of the 21st century:
- Sustainability: enhancing the environment for growth, rather than degrading it.
- Inclusion: sharing the benefits of progress in ways that are just and equitable.
Dry season bean production in drought-affected Nicaragua, made possible by the construction of reservoirs to capture and store rainwater during the country's rainy season, which is then used to irrigate crops during the dry season. Photo: Neil Palmer/CIAT
Dry season bean production in drought-affected Nicaragua, made possible by the construction of reservoirs to capture and store rainwater during the country's rainy season, which is then used to irrigate crops during the dry season. Photo: Neil Palmer/CIAT
As we look ahead to the 28th United Nations Conference of Parties (COP28), we must prioritize drought mitigation measures to address the increasing frequency, severity, and pervasiveness of these extreme weather events and secure a path for sustainable, inclusive development.
The significance of green water in mitigating drought impacts, which has been previously overlooked in economic deliberations, cannot be overestimated. Droughts and Deficits highlights the need for sound stewardship of forests and other natural capital that affect the hydrological cycle and soil moisture, but are seldom associated with the growth impacts of droughts.
Vegetable farmer in Ferghana Valley, Kyrgyz Republic.
Vegetable farmer in Ferghana Valley, Kyrgyz Republic.
Countries must also proactively address their vulnerabilities through upgrades in information systems, institutions, and infrastructure that build drought resilience. This includes the development, implementation, and integration of early warning systems and more regular and proactive evaluation of countries' vulnerabilities, including post-disaster needs assessments and drought needs assessments.
Captured by satellite imagery, this image shows the edge of the dry desert in west Africa contrasted with vegetated land. Signs of land degradation can be seen around villages and to a lesser extent along roads and rivers showing bare soil and degraded vegetation. The image shows parts of three African countries: Senegal, The Gambia and Guinea-Bissau. Credit: European Space Agency
Captured by satellite imagery, this image shows the edge of the dry desert in west Africa contrasted with vegetated land. Credit: European Space Agency
Captured by satellite imagery, this image shows the edge of the dry desert in west Africa contrasted with vegetated land. Signs of land degradation can be seen around villages and to a lesser extent along roads and rivers showing bare soil and degraded vegetation. The image shows parts of three African countries: Senegal, The Gambia and Guinea-Bissau. Credit: European Space Agency
Captured by satellite imagery, this image shows the edge of the dry desert in west Africa contrasted with vegetated land. Credit: European Space Agency
Captured by satellite imagery, this image shows the edge of the dry desert in west Africa contrasted with vegetated land. Signs of land degradation can be seen around villages and to a lesser extent along roads and rivers showing bare soil and degraded vegetation. The image shows parts of three African countries: Senegal, The Gambia and Guinea-Bissau. Credit: European Space Agency
Captured by satellite imagery, this image shows the edge of the dry desert in West Africa contrasted with vegetated land. Credit: European Space Agency
The World Bank strives to help countries incorporate all of these approaches into their mitigation plans to effectively reduce the impacts of droughts and build resilience for the future.
For more information:
Credit: Pixabay
Credit: Pixabay
Video and Photo credits: World Bank Group unless otherwise noted.
This immersive story was designed and developed by Yann Kerblat and Melody Hill Kokoszka, with suggestions from Esha Zaveri, Sarah Farhat, Zubedah Robinson, and Meriem Gray.