Citigroup warns El Niño could cost global economy trillions

Citigroup ↘ 1.75% economists warned this week that a rapidly intensifying El Niño event could inflict between $3 trillion and $7 trillion in economic losses over the next five years, with the worst-case "super El Niño" scenario representing 6.4% of global GDP.marketwatch+1

A New Supply Shock Emerges

"While one supply shock is abating, another one may be around the corner," economists at Citigroup, led by Nathan Sheets, wrote in a note published Thursday. The warning comes as energy prices have begun to retreat from highs triggered by the Middle East conflict, but the bank cautioned that El Niño could deliver "damaging effects for years to come" on agriculture, infrastructure, and productivity worldwide.morningstar+1

The climate pattern is already underway. NOAA's Climate Prediction Center has issued an El Niño Advisory, confirming that El Niño conditions are present, with equatorial sea surface temperatures above average across the central and eastern Pacific Ocean. The agency expects conditions to strengthen into the Northern Hemisphere winter of 2026-27, with forecast models from the International Research Institute showing a 97 to 98% probability of El Niño persisting through early 2027. NOAA has also projected a 63% chance of sea surface temperatures surpassing 2.0°C in the Pacific — a threshold that would signal a "very strong" event.fortune+2

Satellite Evidence Mounts

NASA satellites have detected a massive Kelvin wave — a pulse of warm water stretching hundreds of miles along the equator — moving eastward across the Pacific. NOAA's own analysis confirmed that downwelling Kelvin waves were initiated in December 2025, January 2026, March 2026, and June 2026, with positive subsurface temperature anomalies building. The Niño 3.4 region, a key monitoring area, already shows sea surface temperature departures of 1.1°C above average.livescience+2

Historical Precedent

The stakes are clear from history. One of the most powerful El Niño events on record — the 2015-16 episode — cost the world economy an estimated $5.7 trillion, according to Fortune. Early forecasts suggest the 2026 cycle could surpass it in intensity.fortune

The World Meteorological Organization issued its own alert in late May, noting an 80% likelihood of El Niño during June through August 2026, with probabilities near or above 90% for persistence through at least November. The WMO warned of increased risks of heat stress, drought, and compounding hazards across multiple regions as the event develops.wmo