This blog post summarizes and expands on a recent report from the Bank of Korea that warns extreme weather events tied to climate change are already denting economic growth. The report suggests these impacts will likely do far more damage if left unchecked.
I explain the report’s key findings and provide context from global examples like South Asian floods and Hurricane Helene (2024). The post also outlines practical policy and individual actions to reduce future economic risk.
Why the Bank of Korea’s warning matters for growth and stability
The Bank of Korea found that extreme weather trimmed South Korea’s third-quarter GDP growth by about 0.1 percentage point in the 2020s. This measurable impact reflects a broader pattern linking more frequent floods, heat waves, droughts, and storms to persistent economic costs.
How weather shocks translate into economic damage
Extreme weather affects economies through several channels. Direct physical damage to infrastructure raises repair and replacement bills.
Disruptions to agriculture and fisheries cut output and incomes. Heat stress and floods reduce labor productivity, while insurance and financing costs rise as risk profiles deteriorate.
The Bank of Korea emphasizes that these effects are not short-lived. Repeated shocks erode productive capacity and can suppress long-term potential growth.
Global examples underline the scale of the problem:
Social and environmental consequences that amplify economic risk
Beyond immediate losses, extreme weather deepens inequality and degrades natural capital. The Bank of Korea stresses that low-income communities bear a disproportionate share of health and financial burdens from disasters.
At the same time, environmental changes—such as saltwater intrusion and reduced freshwater supplies—threaten long-term resource availability.
Water security is a growing concern: the report cites that currently about 55% of people lack regular access to clean water. Projections suggest this could rise to 66% by 2100 if trends continue.
Flooding and seawater intrusion exacerbate shortages, undermining agriculture, industry, and public health systems.
Nature and productivity are already being affected
Climate stress is visible in ecosystems as well. For example, autumn foliage in parts of the U.K. and U.S. has been observed as less vibrant due to heat stress on trees—an early indicator of broader ecological strain.
In South Korea, specific sectors—agriculture, fishing, and construction—have reported productivity losses, higher operating costs, and job declines tied to extreme weather and its disruptions.
Policy directions and individual actions that reduce long-term costs
The Bank of Korea’s bottom line is clear: proactive climate policy and investment in resilience are cheaper than inaction.
Economies that delay mitigation and adaptation will face higher fiscal costs, more volatile growth, and greater social disruption.
Key policy measures include improved climate risk assessment in central banking and fiscal planning.
Other measures are targeted support for vulnerable communities, accelerated clean energy deployment, and stronger infrastructure standards to withstand extreme events.
From a financial perspective, integrating climate risk into lending, insurance and public investment decisions is essential.
Individuals also have roles to play.
The report urges citizens to support clean energy investments and advocate for sustainable policy changes.
Simple actions—voting for climate-smart policies, choosing energy-efficient products, and investing in green funds—add up when scaled across communities and markets.
Here is the source article for this story: Experts issue warning on powerful phenomenon dragging down economy: ‘May exert downward pressure’