What Are The Economic Impacts Of A Drought?

A drought often leads to heavy economic losses across multiple industries.
A drought often leads to heavy economic losses across multiple industries.

Droughts are a type of natural disaster that involves below-average precipitation or a severe water supply shortage over a sustained period of time in an area. Water is essential to all life on earth and a shortage of this vital resource in the environment is bound to negatively impact all forms of life, including on the environment and on society, as well as the economy of the affected area. Here is a list of some of the effects of drought on the economy:

1. Agricultural Losses

Perhaps no other economic activity suffers more than agriculture during a drought. Such natural disasters severely affect the growth of crops in the field, especially those that are dependent on natural precipitation as the major source of water. Crop die-offs occur during droughts. Thus, farmers, especially those engaged in subsistence farming, suffer badly during this time as agriculture is usually their lone source of income. Inadequate water and fodder supplies also lead to losses of livestock, further aggravating the economic losses incurred by the farmers.

2. Lowered Industrial Productivity

Water is one of the major requirements of most industries. Thus, droughts impact the smooth operation of these industries. The lowered water supply especially affects the mining, chemical, paper, wood, and foodstuff industries where the need for water is significantly high. The agro-based industries are one of the worst sufferers during periods of drought. The crop failures incurred during this time lead to the failure of all industries related to the transport, storage, processing, packaging, and selling of the agricultural products.

3. Lowered Hydroelectrical Production

Low water levels due to reduced levels of precipitation translates to decreased production of hydroelectricity. Thus, drought-afflicted places that are highly dependent on this alternative source of energy suffer greatly.

4. Heightened Risk of Bushfires

The dry environmental conditions during droughts often serve as the ideal situation for the occurrence of bushfires. Such fires can devastate both forestland and farmland. Economic losses incurred due to such fires are thus extremely high.

5. Slower Tourism Industry

In locations where aqua tourism is a major attraction, the drying up of water bodies leads to a lower influx of tourists to the area. Thus, the local tourist industry suffers a setback during this time.

6. Rising Costs

Crop failures will inevitably lead to the loss of the demand-supply balance and the price of agricultural products and other related products will soar high. All objects in the market will sell at higher prices. Only those affluent enough will be able to sustain such stressful periods. The poor will suffer the most as they will be unable to buy the basic necessities of life due to the high prices of the products.

7. Health Deterioration

Droughts often lead to famine and its ill effects on human health. Those unable to cope with the skyrocketing prices of food grains and other products in the market will suffer from malnutrition. Thus, the health of the population will deteriorate and put considerable pressure on the economy of the system.

8. Break-Down of the Economy

Depending on the severity of the drought and the size of the area affected, the local, regional or national economy might experience a massive setback. Since water is essential to the survival of all life forms, a lack of it is bound to severely affect all spheres of life. Both the industrial and agricultural sectors will suffer economic losses during this time. The export economy of the nation will also experience a downfall. In places where hydroelectric power is the major source of energy, a drought might trigger the need to search for alternative sources of energy which will again cause great economic losses for the area.


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