Climate change may reduce Pakistan’s GDP 18 to 20% by 2050: World Bank

Islamabad: According to a recent World Bank report, Pakistan’s yearly Gross Domestic Product (GDP) rate could decline significantly over the next 28 years due to the escalating risks associated with climate change.

The World Bank recently published a report stating, “The combined risks from the intensification of climate change and environmental degradation, if not addressed, will exacerbate Pakistan’s economic fragility; and could ultimately reduce annual GDP by 18-20% per year by 2050, based on optimistic and pessimistic scenarios.”

In the optimistic and pessimistic scenarios, between 6.5% and 9% of GDP will likely be lost due to climate change, as greater floods and heatwaves diminish agricultural and livestock yields, ruin infrastructure, sap labour productivity, and impair health.

In addition, water shortages in agriculture might cut GDP by more than 4.6% per year, and air pollution could reduce GDP by 6.5% annually.

With climate change, water usage for non-agricultural purposes is anticipated to expand dramatically.

Under a high-growth (4.9% per year) and high-warming (3°C by 2047) scenario, water consumption is anticipated to climb by approximately 60%, with the biggest rates of the increase occurring in the industrial sector, according to the paper.

In addition, global warming would account for up to 15% of this demand growth. This increased demand will have unexpected repercussions that deprive regions downstream of their water entitlements. The competition between sectors will force intersectoral compromises, which will likely be made at the expense of agricultural water.

In the next three decades, around 10% of all irrigation water will need to be repurposed to meet non-agricultural demand, according to projections.

Releasing 10% of irrigation water without jeopardizing food security will be a complex challenge requiring substantial policy reforms to incentivize water conservation and increase water use efficiency in the agricultural sector, as well as a shift away from water-intensive crops and improved environmental management.

In the absence of such measures, the predicted costs of a forced reallocation of water away from agriculture to suit non-agricultural demands might cut GDP by 4.6% in 2047.

The estimated losses are the costs of forced reallocation of water to suit other urgent demands, such as allocations for water, sanitation, and hygiene (WASH) and environmental flows to preserve important ecosystem services.

Extreme weather-related occurrences will affect the entire economy, including growth, fiscal space, employment, and poverty.

Impacts on lives, infrastructure and assets, and livelihoods can result in lost economic growth, increased poverty, and longer-term human capital and productivity challenges.

Existing macro models can assist in estimating the anticipated magnitude of such catastrophes.

The paper said that household poverty is anticipated to decrease over time. Still, even a 9% loss in GDP by 2050 is sufficient to halt poverty reduction, with disproportionate effects on rural households.

By 2030, it is anticipated that the urban poverty rate will be half that of the rural rate. Urban poverty is anticipated to decrease to 10% by 2050, but rural poverty is projected to continue in the 25–28% range.