La Niña could pose a greater threat to the global economy

While the world’s attention is fixed on El Niño, researchers are highlighting a blind spot in economic analysis. La Niña, the cold phase of the same climate cycle, has received far less attention, yet it may trigger a surge in food prices with serious repercussions for the global economy. 

For the past few months, the world has been at the mercy of record-breaking levels of turbulence from the ‘Little Boy’. In early October, the US National Oceanic and Atmospheric Administration (NOAA) recorded temperatures in the equatorial Pacific Ocean 2.3°C above normal. It put the probability of a “very strong” El Niño event this winter at over 90%, potentially making it the most intense since 1950. The natural phenomenon typically recurs every two to seven years, disrupting rainfall, drought and temperature patterns across large parts of the globe. Studies suggest that human-induced global warming could amplify its intensity.1 

The consequences extend well beyond the weather. In 2023, a study by researchers at Dartmouth College, published in Science, estimated that the El Niño event then expected – less intense than the one now looming – could cost the global economy as much as $3 trillion by 20292. 

These estimates, however, capture only part of the picture. Economists Gilles Dufrénot, William Ginn and Marc Pourroy have measured the effects on the global economy of not just El Niño, but also La Niña, the cold phase of the same climate cycle. Their findings challenge some of the assumptions shaping today’s debate. 

• 1

  Cai W., Ng B., Geng T. et al., 2023, « Anthropogenic impacts on twentieth-century ENSO variability changes », Nature Reviews Earth & Environment, 4 (6), 407–418.

• 2

  Callahan C. W., Mankin J. S., 2023, « Persistent effect of El Niño on global economic growth », Science, 380 (6649), 1064–1069.

El Niño is just one phase of a more complex cycle

El Niño takes its name from Peruvian fishermen who noticed that Pacific waters warmed around December, causing their catches to dwindle. The Spanish term El Niño, meaning “Little Boy”, referred to the Christ Child, celebrated at Christmas.

Warming ocean waters are just one phase of a climate cycle known as ENSO, short for El Niño–Southern Oscillation. El Niño is the warm phase, when surface waters in the equatorial Pacific heat up. Indonesia, Australia and parts of Africa will face drought in consequence, while Peru and Ecuador are battered by heavy rainfall.

Pêcheurs sur la côte péruvienne. © Alex E. Proimos / Flickr (CC BY-NC 2.0)

La Niña, the cold phase, largely reverses this pattern: heavy rains fall across Southeast Asia and Australia, while drought spreads through South America and the Horn of Africa. The initial impact falls on fishing and farming communities, but the effects ripple outward, disrupting international trade, driving commodity prices up or down and ultimately influencing decisions made by central banks.

Most studies have traditionally treated El Niño as the main disruptor, yet economists Gilles Dufrénot, William Ginn and Marc Pourroy take a different approach, examining the shifts in climate conditions between the phases of the cycle. This allows them to demonstrate how La Niña also affects the global economy less through changes in output, than through an impact on prices.

El Niño Godzilla: a major economic disruptor?

In Peru, the warning signs are flashing red. Torrential rain, flooding and drought have earned the current phenomenon nicknames such as Super Niño and El Niño Godzilla. Yet however devastating its effects may be in some regions, they are not necessarily negative everywhere. This year, for example, El Niño has curbed hurricane formation in the Atlantic. So how can its overall impact on the global economy be measured?

The researchers compiled monthly data covering 20 economies from 1999 to 2022, including the United States, China, the euro area, India and Brazil. Together, these economies account for around 80% of global GDP. Each country is weighted according to its economic size, meaning that a shock affecting a major economy carries more weight in the overall results than one hitting a smaller country.

 

Rice field hit by drought after a long dry season in Sukoharjo, Central Java, Indonesia © noer cungkring / AdobeStock.

The findings upend some established assumptions about ENSO. The first, and perhaps most counterintuitive, is that El Niño does not reduce global output over the long term. Its negative effects on production reverse after roughly nine months.

One explanation is that the damage is concentrated in tropical countries such as Indonesia and Peru, which account for a smaller share of global output. Major economies such as the United States and Canada, by contrast, may even benefit: some crops thrive with increased rainfall, while the Atlantic experiences fewer hurricanes. At the global level, gains in some countries offset losses in others.

El Niño therefore exacerbates existing inequalities between countries, disproportionately affecting those in the tropics and near the equator.

The true cost of La Niña

The study’s second major finding concerns La Niña. While global output remains broadly unchanged, food prices can soar. By increasing the risk of flooding, La Niña can hit some of the world’s major agricultural breadbaskets, including Argentina, southern Brazil and the US plains, all major exporters of maize, soybeans and wheat. As grain supplies tighten on international markets, prices rise, pushing up food costs even in countries spared the extreme weather.

By studying ENSO as a whole, the researchers have brought La Niña out of the blind spot in public debate. Some caution is warranted, however. The dataset on which the study depends begins in 1999, just after the super El Niño of 1997–98. It therefore does not capture an event on the scale of the one currently developing.

 

A woman pays for groceries at a supermarket checkout. © Getty Images / Unsplash +

Prepare for cycles, not just disasters

The study offers a deeper understanding of ENSO across its different phases. The key is to anticipate a sequence of events rather than treating each episode as an isolated crisis: warming, cooling, a neutral phase and then another shock. For vulnerable economies, resilience depends less on reacting to a single emergency than on their ability to withstand repeated cycles.

The researchers highlight the intrinsic link between climate disruptions and inflation, showing that the cold phases of ENSO and the transitions into them may pose a greater threat to prices than previously recognised. This does not mean El Niño is harmless: countries bearing the brunt of its effects may still face a series of economic setbacks.

Gilles Dufrénot stresses the importance of protecting those hit first, including farming and fishing communities and vulnerable urban areas. The response, he argues, must go beyond national action to build resilience at the global level. “If forecasts point to poor harvests, grain reserves built up in regions spared by the phenomenon could help make up the shortfall and prevent scarcity from turning into a price spike,” he argues. It is an approach that links food security to managing what some economists have now termed “climateflation”.