A potentially strong El Niño event could cost the global economy around $451 billion in lost economic output in 2027 (and China, the United States and India represent nearly 60 per cent of the gross loss), according to a new Allianz Research report.
Such an estimate highlights the potential economic impact of extreme weather at a time when countries are already dealing with inflation, supply chain pressures and climate-related risks.
The Allianz Climate Economics Report 2026 estimates the potential impact across 144 economies. Its scenario is based on the temperature effects observed during the strong 2023-24 El Niño event and considers the possible temperature changes associated with the current 2026-27 event.
The report estimates that the net output loss of about $451 billion, which corresponds to about 0.24 per cent of projected GDP across the economies studied.
China, US and India are going to suffer major economic losses.
According to the Allianz analysis, China could account for approximately $147 billion of gross losses, followed by the United States at about $91 billion and India at about $50 billion. Combined, the three economies account for around 60 per cent of the gross losses estimated in the report.
The size of the predicted losses reflects the size of these economies and their exposure to changes in temperature, agriculture, consumer demand and other economic activities. But the figures should not be interpreted as an exact prediction of the final economic cost. They are a scenario-based estimate of the temperature-related impact of El Niño.
The report also notes that this calculation does not take into account several potentially important consequences of extreme weather. Such damage from droughts, floods, wildfires and other events is not included in the $451 billion estimate. So the final economic impact might be far different depending on how the weather changes.
Why El Niño can hurt economies?
El Niño is a natural climate phenomenon associated with unusually warm sea-surface temperatures in the central and eastern tropical Pacific Ocean. The warming disrupts atmospheric circulation and can change rainfall and temperature patterns across large parts of the world.
These changes impact agriculture very much. In areas where drought occurs, crop yields may plummet, and in other places there can be more rainfall and flooding. Agricultural production can affect the price of food, exports and household expenditures.
El Niño also affects energy demand. Higher temperatures can drive up the use of cooling systems, and rainfall changes may have an impact on hydropower generation in some regions. At the same time, disruption in transportation, agriculture and industrial production can put additional pressure on supply chains.
Allianz Research has described the emerging 2026-27 El Niño as a potential macroeconomic event because of its implications for inflation, trade flows, supply chains and corporate earnings.
India faces agricultural and inflation risks
In India, the economic impact of El Niño is closely related to rainfall and agriculture. The production of crops that depend heavily on seasonal rainfall can be affected by a weak or irregular monsoon.
A July 2026 CRISIL analysis found kharif production, which covers a large part of India’s foodgrain output, is sensitive to southwest monsoon shocks during El Niño. It also warned that weather conditions could create downside risks for agricultural growth and upward pressure on food inflation.
India's economy may have some buffers against weather-related disruptions, such as increased irrigation coverage, foodgrain stocks and an increasing share of the agricultural sector contributing to the country’s economy, CRISIL’s analysis found. But the nature of rainfall and timing remain significant factors in determining agricultural outcomes.
The latest economic assessment also comes as India’s Finance Ministry has flagged the possibility of a strong El Niño affecting winter crop yields.
China is ready for El Niño.
China is also preparing for potentially major weather disruptions. Chinese government meteorologists said in September that the country was bracing for what they described as the strongest “super El Niño” event on record later in 2026.
The country’s large agricultural sector and huge industrial economy mean the shift in rainfall, temperature and water availability could have broader economic consequences. Extreme weather can affect agricultural production and disrupt infrastructure, logistics and energy demand.
China’s projected $147 billion gross loss is the largest individual country estimate in the Allianz report. But it is the modeled economic impact rather than an inevitable loss.
US economy also vulnerable
The United States is another major economy exposed to El Niño-related weather changes. The Allianz analysis estimates about $91 billion in gross losses for the US under its scenario.
The effects can vary significantly across areas. El Niño can have a big impact on rainfall and temperature patterns in different areas of the country as well as agriculture, energy consumption and other economic activity.
The US economy is large and diversified, and individual weather disruptions can reduce the impact on the overall economic output. But extreme events happening at the same time in many sectors can still incur big costs.
Inflation may add to the economic pressure.
El Niño can also affect consumers through prices. Allianz estimates that the scenario could raise headline inflation by an average of 0.42 percentage points and food inflation by about 0.65 percentage points across the economies covered when weighted by purchasing power parity.
Food prices are particularly sensitive because agricultural production depends heavily on weather. A reduction in crop outputs can push up prices, and disruptions to transportation and international trade can add further pressure.
But central banks find this difficult to control because weather-driven inflation may occur alongside weaker economic activity. And in that case, decision-making on interest rates and other monetary-policy measures can be more difficult.
A wider climate risk
The $451 billion figure is only one estimate of the potential economic impact of the developing El Niño. Other research has established that the economic impact of major El Niño events can continue for several years after the initial climate shock.
Based on a study published in Nature Communications, previous extreme El Niño events, including 1997-98 and 2015-16, produced much larger cumulative economic losses when longer-term effects were taken into account. The researchers identified channels including reduced agricultural productivity, trade disruption, infrastructure damage and changes in energy and tourism activity.
So the current El Niño is currently closely watched by governments, economists and climate scientists. Recent reports suggest that the event might become exceptionally strong and it may be felt into early 2027.
For India, China, the US and other major economies, the coming months will show how closely actual weather conditions match current projections. The Allianz estimate highlights the economic stakes, but how much impact there will be will depend on the extent and duration of El Niño, regional weather patterns and how governments and businesses can prepare for disruption.
