LONDON: Countries around the world are battling heatwaves and floods fuelled by El Nino, a naturally occurring climate phenomenon that has a 90% probability of persisting in the second half of 2023, according to the World Meteorological Organization. The worldwide impact can be enormous, but the stakes are higher for emerging markets, which are more exposed to swings in food and energy prices and production and often have smaller fiscal buffers that limit their ability to cushion the impact.
Below are five charts showing the impact El Nino – when waters in the central and eastern Pacific are warmer than usual – could have on key emerging markets.
MOST VULNERABLE
India and Egypt are among the economies that are overall most vulnerable to El Nino’s impact this year, according to an index by Standard Chartered Bank, taking into account the weight of the primary sector, the share of food in inflation baskets and a country’s ability to offset through fiscal support.
Ghana, Kenya and the Philippines are also high up on the list while countries such as South Africa and Chile are among the least vulnerable – together with most of the developed market economies such as Germany or the United States. Eugene Klerk, head of ESG Research at Standard Chartered Bank said,
We believe that the countries most at risk from an El Nino event this year are those that have relatively weak economic fundamentals and that experienced relatively weak agricultural production during the 2014-16 El Nino period.
AGRICULTURAL PRESSURES
Sudden changes in rainfall or temperature can wreak havoc on crops. With agriculture accounting for a larger share of the economy and employment in Africa and South Asia than elsewhere, these regions are especially vulnerable to the El Nino fallout. According to a research note led by Jennifer McKeown, chief global economist for Capital Economics,
A sharp reduction in the volume of crops that can be exported could result in balance of payments strains for some economies.
Also Read: Explainer- How El Nino Is Helping Drive Heatwaves And Extreme Weather
India has banned exports of a key variety of rice, cutting overall supplies to world markets by a fifth. Nearly 90% of rice is produced in Asia, and threatened by dry El Nino weather, with the Philippines and Thailand also at risk. Other produce in focus includes cocoa from Ivory Coast and Ghana, sugar from India and Thailand and coffee from Vietnam and Indonesia.
There are, however, exceptions – Argentina had a record soy harvest in previous El Nino episodes, according to Morgan Stanley. The bank’s Fernando Sedano wrote in a note, added,
El Nino tends to be negative in EM, though Argentina is an exception. Argentina is likely the only net winner of El Nino.
FRAGILE FOOD
Food prices make up a larger share of the CPI baskets of emerging markets – as much as 40% in many low income economies – so El Nino’s severity is set to directly impact inflation.
A European Central Bank analysis suggests that a one-degree temperature increase during El Nino historically has raised global food prices by more than 6% after one year.
Southern Africa, Central America and the Caribbean and parts of Asia are of “particular concern” due to already high levels of food insecurity, according to the Food and Agriculture Organization of the United Nations(FAO).
David Rees, senior emerging markets economist at Schroders, warned that a strong El Nino could push emerging market food inflation back into double digits in 2024.
A HYDRO QUESTION
Significant changes to rainfall, or prolonged droughts, could also impact hydropower output and boost gas and coal prices as a result, according to Capital Economics. The note said,
Several countries, mostly in Africa, are heavily reliant on hydroelectricity. Lower rainfall could hinder electricity generation and possibly lead to power rationing.
Also Read: Explainer: How El Nino Could Impact The World’s Weather In 2023-24
Energy prices are also a key driver of food inflation, they warned, while warmer temperatures could increase demand for air conditioning.
CLOUDING THE INFLATION PICTURE
Latin American central banks were among the first to ramp up interest rates after COVID-19 to fight rising prices, and are the first to kick off easing, led by Chile and Brazil.
But the El Nino impact on agricultural production and electricity generation could complicate disinflation, and lead to higher-for-longer rates. BofA’s Latam local market strategist Antonio Gabriel said,
Colombia and Peru are the most exposed countries, followed by Chile and Brazil to a lesser extent.
BofA estimates that El Nino would be “at least of moderate intensity this year”, but severe intensity could raise inflation by up to 2.5% in Colombia and 1.5% in Peru. Gabriel added,
Mexico seems mostly isolated
(This story has not been edited by NDTV staff and is published from a syndicated feed.)
NDTV – Dettol have been working towards a clean and healthy India since 2014 via the Banega Swachh India initiative, which is helmed by Campaign Ambassador Amitabh Bachchan. The campaign aims to highlight the inter-dependency of humans and the environment, and of humans on one another with the focus on One Health, One Planet, One Future – Leaving No One Behind. It stresses on the need to take care of, and consider, everyone’s health in India – especially vulnerable communities – theLGBTQ population,indigenous people, India’s different tribes, ethnic and linguistic minorities, people with disabilities, migrants, geographically remote populations, gender and sexual minorities. In wake of the currentCOVID-19 pandemic, the need for WASH (Water,SanitationandHygiene) is reaffirmed as handwashing is one of the ways to prevent Coronavirus infection and other diseases. The campaign will continue to raise awareness on the same along with focussing on the importance of nutrition and healthcare for women and children, fightmalnutrition, mental wellbeing, self care, science and health,adolescent health & gender awareness. Along with the health of people, the campaign has realised the need to also take care of the health of the eco-system. Our environment is fragile due to human activity, which is not only over-exploiting available resources, but also generating immense pollution as a result of using and extracting those resources. The imbalance has also led to immense biodiversity loss that has caused one of the biggest threats to human survival – climate change. It has now been described as a “code red for humanity.” The campaign will continue to cover issues likeair pollution,waste management,plastic ban,manual scavengingand sanitation workers andmenstrual hygiene. Banega Swasth India will also be taking forward the dream of Swasth Bharat, the campaign feels that only a Swachh or clean India wheretoiletsare used andopen defecation free (ODF)status achieved as part of the Swachh Bharat Abhiyan launched byPrime Minister Narendra Modiin 2014, can eradicate diseases like diahorrea and the country can become a Swasth or healthy India.
