Knock-on impact of droughts on economies lasts years

Prolonged droughts erode GDP, investment, and employment for years, a new study finds. This cost is frequently underestimated and will rise further as the planet warms.

The impact of drought on Germany’s river Rhine has damaged the economy

The drought of 2015-18 cost Europe €439 billion, with the impacts on construction and manufacturing lasting for years, according to Italian researchers.

A study of the multi-year economic impacts of droughts has for the first identified the medium- and long-term economic repercussions of drought across a range of sectors.

It found that businesses postpone and cut investment for years after a drought, well beyond the immediate shock.

This is a sign that drought raises the cost of capital and discourages productive spending over the long term, the researchers said.

It’s the first time we track the full economic impact of prolonged drought, sector by sector.Different sectors of the economy respond on different timescales. The impact on farming is the biggest in the short term, but it recover

s within two or three years thanks to insurance, price adjustments and changes of crop, they said. In contrast, construction and manufacturing, carry losses that remain the deepest of any sector and intensify for years after the drough

t begins, they found.“It’s the first time we track the full economic impact of prolonged drought, sector by sector,” said lead author of the study Marta

Mastropietro, from the Euro-Mediterranean Center on Climate Change (CMCC) and Politecnico of Milan. The researchers looked at fine details to reveal aspects that one-year estimates miss,

Original Record.

This archived record authored by ‘Catherine Early’ at ‘METEORED (Your Weather)’ was recovered from data set:

https://www.yourweather.co.uk/news/science/knock-on-impact-of-droughts-on-economies-lasts-years.html