Super El Niño Approaches: $700 Billion Is Just the Beginning, Even Greater Impact May Come Next Year

Recently, major climate agencies such as the U.S. National Oceanic and Atmospheric Administration (NOAA), European Centre for Medium-Range Weather Forecasts (ECMWF), Japan JAMSTEC, and the Australian Bureau of Meteorology (BOM) have continuously raised the strength forecast for this round of El Niño. Compared to previous climate cycles, the evolution of this El Niño event is exceptionally rapid, with the coupling effect between ocean and atmosphere continuously amplifying under the impetus of westerly wind bursts. Sea surface temperatures in the Niño 3.4 region have hit new daily highs for 60 consecutive days, 0.83°C higher than the levels during the 1997/98 super El Niño at the same stage.

Currently, the probability of this El Niño evolving into a super event has exceeded 80%. If the Niño Index breaks above 2.2°C between October and November this year (as is highly likely), it will rank among the strongest El Niño events since 1950. The climate impact has already begun to appear: record-breaking heatwaves in Europe have sent air conditioning demand surging; meanwhile, rainfall from India's southwest monsoon is more than 20% below the long-term historical average, posing a severe threat to agricultural production.

Based on historical elasticity calculations, if this El Niño reaches the strength of the 1997/98 event, global GDP loss for this year alone is expected to reach $686 billion (about 0.6% of global GDP). The more profound impact lies in the income decline and infrastructure damage caused by El Niño, which will crowd out other investments and leave lasting scars. Cumulative economic losses over the next five years could soar to $3.1 trillion.

Beyond Extreme Weather: The Real Concern Is Supply Side Shocks

Under this kind of systemic shock, emerging markets—especially Latin America and Africa—will suffer the most severe economic losses, with sovereign credit risk rising significantly. The extensive reduction in crop yields triggered will also directly impact the global food supply chain.

As a result, Europe's corn output may shrink dramatically to below 50 million tons, forcing EU import demand up to a record 25 million tons. In Asia, extreme heat and drought have severely hit rice and sugarcane production in India and Thailand; countries in Southeast Asia such as Vietnam and the Philippines are facing delayed planting and rising irrigation costs, placing palpable pressure on the global supply of rice, sugar, palm oil, and other agricultural products. Across the Americas, Brazil and Argentina could see corn and wheat harvests suffer production cuts from 20% to as much as 60%.