The 2026–2027 El Niño climate event is expected to be one of the most intense in the last fifty years, with sea-surface-temperature anomalies potentially exceeding +3°C in the equatorial Pacific. According to the World Meteorological Organisation (WMO), El Niño is expected to persist until February 2027, with asymmetrical effects, as South-East Asia and northern Latin America will experience droughts, while southern Brazil and Argentina could see heavy rainfall. Above all, El Niño is compounding the effects of global warming and exacerbating existing extreme-weather events (droughts, floods and heatwaves).
The economic effects of this climate shock mainly play out through three avenues: agricultural commodity prices, energy and logistics (see heatmap).
Vulnerabilities differ, depending on a country’s dependence on food, energy and logistics
Agricultural commodity prices: volatility is causing tensions, with inflationary effects
In India and South-East Asia, droughts will affect harvests, pushing up prices (particularly for coffee, cocoa, rice and palm oil). Conversely, in southern Brazil and Argentina, heavy rainfall will boost soya and maize production, putting downward pressure on prices. According to the IMF, El Niño causes global food prices to rise by between 5% (in a typical episode) and 8% (very high intensity) year-on-year, with the full impact being felt 6 to 12 months after the climatic peak.
Therefore, for a given country, the weighting of food in its inflation index (CPI) plays a decisive role. As a result, all other things being equal, an 8% rise in prices adds around 1 pp to inflation when food accounts for 13% of the CPI basket (average for countries shown in green on the heatmap), 1.8 pp when this share reaches 22% (yellow), 2.8 pp at 35% (orange) and nearly 4 pp above 49% (red).
The risks are skewed to the upside, as the 8% estimate does not take into account additional losses linked to droughts, floods and other extreme events, while policy responses to shocks (stockpiling by importers and increased export restrictions) may amplify and prolong price pressures. The rice market between 2023 and 2024 illustrates this well, as the combination of rice-export restrictions imposed by India in July 2023 (in order to protect its domestic market) and of the drought in South-East Asia contributed to a 30% average increase in the price of rice over the course of 2023 and kept global prices high for several months after the end of the El Niño episode.
Energy production sector: heavy reliance on hydroelectricity leaves the sector vulnerable to a second supply shock
Droughts will reduce hydroelectric power generation in Latin America and South-East Asia. As a result, some countries will have to turn to other, more expensive solutions, such as fossil fuels, against a backdrop of already high oil and gas prices. This shift will increase global demand for oil and put pressure on prices which, according to the IMF, could persist for up to four quarters after the initial El Niño shock. For example, in Colombia, where hydropower accounts for 55% of electricity generation, a 30% drop in output (already seen in 2023–2024) could increase the cost of electricity generation by 15 to 20% (assuming that the cost of thermal power generation is twice as high as hydropower). In Ecuador (70% of electricity generation) and Vietnam (30%), electricity shortages are likely to disrupt local industries.
Logistics: transport infrastructure is another point of vulnerability
The final channel relates to disruptions to freight transport against a backdrop of already weakened value chains. The variable used in our heatmap is a proxy for economies’ abilities to absorb a shock (particularly a climate-related one) affecting their transport infrastructure (for example, by maintaining traffic flow, diverting or reorganising transport flows). The heatmap highlights the particularly high vulnerability of Latin America. Its capacity to absorb a logistics shock is relatively limited, and there is significant exposure at a strategic chokepoint, the Panama Canal, through which approximately 5% of global trade passes. Low rainfall in the canal basin has already led to the number of daily transits being reduced in September 2026 (as in 2023–2024); further restrictions are expected in October (to 29 transits per day, down from 36 in August), which will increase transport times and costs. Europe is also being affected, with low water levels on the Rhine and the Danube already disrupting river transport and electricity generation.
Latin America and South-East Asia are hit hardest
Therefore, the economies most at risk are not necessarily those that will suffer the greatest climate shock, but those where multiple transmission channels converge, including a high weighting of food prices in inflation, reliance on hydroelectricity, fragile transport infrastructure and limited fiscal room for manoeuvre. Latin America and South-East Asia are home to some of the most vulnerable countries, particularly due to their dependence on food prices and hydroelectricity. Colombia and Ecuador are noteworthy for their high exposure to energy risk, while Ghana, India and the Philippines are some of the economies most vulnerable to a food shock. Latin America faces a combination of vulnerabilities, such as high exposure to food and energy price shocks in some countries, which are compounded by logistics risks, as currently illustrated by the restrictions on traffic through the Panama Canal.
