S&P: El Nino to Hit Asia-Pacific Households with Supply Shocks

S&P Global Ratings has warned that households across Asia-Pacific economies, including India, Vietnam, Indonesia, and the Philippines, are highly susceptible to weather-related supply shocks, particularly those triggered by El Nino.

The rating agency noted that the effects of the El Nino period, projected to begin in 2026, will primarily manifest through reduced agricultural output and higher food inflation. It also anticipates diminished hydropower generation, alongside increased vegetation fires and haze across the region.

El Nino’s Broadening Impact

The World Meteorological Organisation (WMO) last month confirmed strong El Nino conditions are developing. These conditions are expected to strengthen from August through October, leading to powerful weather events and above-normal global temperatures.

South and Southeast Asia stand out as particularly vulnerable regions worldwide. Lower rainfall associated with this climate phenomenon will likely drive up food prices and disrupt water-intensive industries.

Mitigating Future Shocks

S&P Global Ratings, however, indicated that proactive policies could limit the damage from El Nino. These strategies include shifting to water-efficient crops, maintaining higher grain reserves, and improving water management practices.

Many economies have already bolstered their resilience by expanding food buffer stocks, enhancing import planning, and strengthening market management mechanisms. Investments in reservoir management and irrigation infrastructure also play a crucial role in strengthening resilience.

India’s Preparedness

For India, the presence of strong food and grain buffers for affected crops as of July 2026 is considered key to managing potential food shocks. Authorities are also implementing district-level coordination with farmers to minimize crop losses effectively.

Despite these vulnerabilities, S&P Global Ratings suggests the overall macroeconomic impact for Asia-Pacific economies is likely to remain manageable, thanks to declining agriculture roles and strengthened policies.