Reviewing the Economic Impacts of Climate Change Across Key Sectors in Developing Countries

Abstract

Climate change is increasingly recognised not only as an environmental challenge but as a first-order economic threat, and its burden falls most heavily on developing countries whose economies depend on climate-sensitive sectors and whose institutions have limited capacity to adapt. This paper reviews the economic impacts of climate change across the key sectors of agriculture, health, water, energy and the wider macroeconomy in low- and middle-income countries, synthesising evidence published between 2015 and 2024. Drawing on econometric studies, computable general-equilibrium models and international assessments, the review shows that rising temperatures and shifting rainfall depress crop yields and agricultural gross domestic product, raise the incidence of climate-sensitive disease and reduce labour productivity, strain water availability and hydropower generation, and slow aggregate economic growth. Country-level modelling projects real GDP losses ranging from a few percent to more than ten percent by mid-century under high-impact scenarios, with the most vulnerable households bearing a disproportionate share of the cost. The review also finds that adaptation finance remains far below estimated need, even though returns on adaptation investment are consistently high. Three summary tables collate quantified sectoral impacts, projected macroeconomic losses, and the adaptation-finance gap. The paper concludes that climate change threatens to reverse hard-won development gains unless context-specific adaptation and mitigation measures are scaled up and adequately financed, and it identifies priorities for future research.