Water Insecurity Costs the Global Economy $500 Billion Per Year

Water insecurity costs the global economy some US$ 500 billion annually, according to Global Water Partnership (GWP).

Water insecurity – droughts, floods, sanitation and inadequate water supply for populations, food and energy sectors – acts as a drag on global economic growth, and the scale of the challenge that can be monetised is estimated to be in the order of US$500 billion annually (excluding environmental risks).

“By 2050, 3.9 billion people are projected to live with high water stress”

“Achieving water security means meeting the needs of both human beings and ecosystems,” said Ursula Schaefer-Preuss, Chair of GWP. “It requires fundamental changes in values, beliefs, perceptions, and political positions, not just among water management institutions but among all stakeholders, including the vulnerable.”

Costs of Water Insecurity

According to GWP, in the USA, China, and India, expected annual flooding damages are in excess of US$10 billion per year. Expected global flood damages are estimated at US$120 billion per year from urban property damages alone.

Major droughts, on average, were found to reduce per capita GDP growth by half a percentage point. In particularly vulnerable economies, a 50% reduction in drought effects could lead to a 20% increase in per capita GDP over a period of 30 years.

The lack of water security is estimated to cost existing irrigators US$94 billion per year.

The greatest economic losses were found to come from inadequate water supply and sanitation, estimated by the World Health Organization to be US$260 billion per year. In some African countries, these losses amount to 10% of GDP.

GWP released these figures based on the report Securing Water, Sustaining Growth (PDF), written by an international task force convened by GWP and the Organisation for Economic Co-operation and Development (OECD). The report looks at water’s destructive force as well as its contribution to human health and prosperity.

According to the report, South Asia has the largest concentration of water-related risks. East and Southeast Asia face rapidly increasing flood risk, although the United States has the greatest exposure to flood risk. Sub-Saharan Africa is the only region where the risks of inadequate water supply and sanitation are rising. North Africa has the greatest percentage of population at risk of water scarcity.

Investment in Water Security and Risk Management

The report published feeds into a Policy Statement (PDF) issued at the 7th World Water Forum in Korea.

The statement calls on governments to invest in water security, in risk management, and in people and partnerships. The statement urges that special attention be paid to social risks, with a focus on vulnerable segments of society.

“Investing in water security will drive sustainable growth,” said OECD Secretary-General Angel Gurría. “These investments must be well-planned, fit with broader development agendas, benefit local communities and the environment, and be flexible enough to adapt to changing circumstances.”

According to UN Water, “water security is defined as the capacity of a population to safeguard sustainable access to adequate quantities of acceptable quality water for sustaining livelihoods, human well-being, and socio-economic development, for ensuring protection against water-borne pollution and water-related disasters, and for preserving ecosystems in a climate of peace and political stability”.

Flood damaged crops Copiapo, Atacama, Chile. Photo: MINAGRI
Flood damaged crops Copiapo, Atacama, Chile. Photo: MINAGRI