This article first appeared in The Edge Financial Daily, on April 22, 2016.

KUALA LUMPUR: The total economic cost of El Nino to Asean economies could exceed US$10 billion (RM38.80 billion) and could rise further if it persists beyond the second quarter of this year, says economist Rajiv Biswas.

Biswas, the Asia-Pacific chief economist at IHS Global Insight, said the adverse effects of the El Nino weather phenomenon are expected to continue through the second quarter, reducing production of key commodities including rice, palm oil and sugar.

He said El Nino has created severe drought conditions in many parts of the region including Malaysia, where water levels in dams and rivers have been falling.

“The falling water levels in some dams may force the government to give priority to households by diverting water supplies away from irrigation uses in some Malaysian states,” he said in a statement yesterday.

Biswas said El Nino has also impacted palm oil production in Malaysia and Indonesia which together account for 85% of global output.

Malaysian palm oil production volume in March 2016 was 18% lower year-on-year, he noted.

Persistent drought conditions in Sabah, which produces 12% of world palm oil output, have reduced the outlook for Malaysian palm oil production and have pushed up palm oil prices during the last two months, he added.

Biswas said that in Thailand, El Nino has caused severe drought in some farming regions, and will reduce output of key Thai agricultural crops, including rice and sugar.

The overall impact of El Nino could detract over 0.5% from Thai gross development product (GDP) growth in 2016, he said.