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2020s Vision: Water scarcity

    Rohit Kumar
    Rohit Kumar

    Global Financials/Thematics

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    Tellimer Research
    13 December 2019
    Published byTellimer Research

    Already, c25% of the world’s population live in extreme water-stressed locations, according to the World Resource Institute, and given rising water demand (and limited supply growth) we expect the situation to worsen over time. In the most acutely affected areas, water shortages will impact both quality of life and the economy. There will be major economic implications even in areas where water scarcity is currently less severe but expected to worsen.

    Water scarcity arises from both demand and supply factors

    On the demand side, water usage is rising continuously due to a growing global population (agriculture is the biggest user of water) and industrialisation (many methods of electricity generation are water-intensive). Global water consumption is twice what it was in 1960s and demand growth shows no signs of slowing.

    Looking at the supply of water, only 3% of the world’s water resources are available for use (ie freshwater) and of these, c70% of these supplies are locked in glaciers. In addition, climate change is creating uncertainty as there is an increasing frequency and severity of droughts and floods in many parts of the world.

    MENA and South Asia are the most water-stressed

    Water shortages are a key concern for countries in MENA and South Asia. The chart below shows the baseline water stress (ie annual water withdrawal divided by available resources). 17 countries face extremely high water-stress and most of these are in MENA (eg Qatar, Israel, Lebanon) and South Asia (eg India, Pakistan). These countries are vulnerable as they already utilise most of their available water (>80%) and are prone to severe water shortages when demand swells or supply is disrupted. We have seen recent high-profile examples of acute water shortages (such as Chennai in India, Cape Town in South Africa). In addition, c27 other countries, mainly in Central Asia, Europe and Sub-Saharan Africa, are under high water stress (using 40-80% of their water resources). The situation is likely to worsen in the coming decade.

    The economic impact

    As per the World Bank, MENA could face one of the biggest hits to its economy due to water scarcity. The impact has been estimated at 6-14% of GDP by 2050. Along with MENA, we think that countries with high contributions from agriculture such as Pakistan (23% of GDP from agriculture) and India (15%) could also suffer significant economic headwinds.

    Chart: Identifying high-risk countries – agriculture dependency versus baseline water stress

    Chart: Identifying high-risk countries – agriculture dependency versus baseline water stress

    Source: World Resource Institute, World Bank, Tellimer Research

    Read our full 2020s Vision: 20 themes for the next decade report.