Climate change may cut Pakistan's GDP by 18pc to 20pc: World Bank

Pakistan's annual economic output could see a cut of 18 per cent to 20pc by 2050 due to climate change risks, according to a report recently published by the World Bank.

"The combined risks from the intensification of climate change and environmental degradation, unless addressed, will further aggravate Pakistan's economic fragility; and could ultimately reduce annual GDP by 18pc to 20pc per year by 2050, based on the optimistic and pessimistic scenarios," it said.

The report stated that between 6.5pc and 9pc of GDP will likely be lost due to climate change (in the optimistic and pessimistic scenarios, respectively) as increased floods and heatwaves reduce agriculture and livestock yields, destroy infrastructure, sap labor productivity, and undermine health. Additionally, water shortages in agriculture could reduce GDP by more than 4.6pc, and air pollution could impose a loss of 6.5pc of GDP per year.

The report highlighted that the use of water for non-agricultural purposes was likely to significantly increase with climate change.

"Under a high-growth (4.9pc per year) and high-warming (3°C by 2047) scenario, water demand is projected to increase by almost 60 percent, with the highest rates of the increase coming from the domestic and industrial sectors."

It stated that climate warming will account for up to 15pc of this increase in demand. This heightened demand will result in unintended consequences that deprive downstream areas of water rights, the report said, adding that the competition among sectors will necessitate inter-sectoral tradeoffs that will likely be made at the expense of water for agriculture. "It is projected that, in the next three decades, about 10pc of all irrigation water will need to be repurposed to meet non-agricultural demand."

Freeing up 10pc of irrigation water without compromising food security will be a complex challenge that will require substantial policy reforms to incentivize water conservation and increase water use efficiency in the agricultural sector and a shift away from water-thirsty crops as well as better environmental management, the report stated. The projected costs of a forced reallocation of water out of agriculture, to meet non-agriculture demands, without such steps, could reduce GDP in 2047 by 4.6pc.

It went on that the losses projected were the costs of forced reallocation of water to serve other urgent

needs, including allocations for water, sanitation, and hygiene (WASH) and urgent environmental flows to sustain critical ecosystem services.

Damage induced by climate-related extreme events will likely have economy-wide impacts on growth, fiscal space, employment, and poverty. Global warming and extreme events affect economic activity through multiple transmission channels: impacts on lives, infrastructure and assets, and on livelihoods, which can result in lost economic growth, worsening poverty, and longer-term threats to human capital and productivity. Existing macro models can help assess the expected scale of such events. -APP

The report added that household poverty was expected to decline over time, but even a 9pc decline in GDP by 2050 was enough to stall poverty reduction, with disproportionate impacts on rural households.

By 2030, the urban poverty rate was expected to be half that of rural areas, it said, adding that by 2050, urban poverty was projected to decline further to 10pc, while rural poverty remained in the 25pc to 28pc range.