BMI: Malaysia among South-east Asian economies facing El Nino crop, power risks

El Niño is a recurring climate pattern involving warmer-than-usual surface waters in the tropical Pacific Ocean. That warming changes air movement and rainfall across large parts of the world. Southeast Asia can become hotter and drier when rain-bearing circulation shifts away from the region.

The article links the 2026–2027 El Niño to higher drought, heat and power risks in Southeast Asia. In past El Niño events, high-intensity drought affected more cropland across exposed regions, including Southeast Asia. Reduced rainfall threatens rice, Thai sugar, Indonesian and Malaysian palm oil, and Vietnamese robusta coffee.

The region may also face major social effects. Around 90 million more people were exposed to drought on average during past El Niño events. The article identifies Southeast Asia as having the largest population impact, while warning that drought could also damage hydropower and increase pressure on electricity systems.

The 2026–2027 El Niño threatens several important Southeast Asian crops because drought can reduce water available to fields and damage growing conditions. The article highlights rice, Thai sugar, Indonesian and Malaysian palm oil, and Vietnamese robusta coffee. These crops support food supplies, exports and rural incomes.

Country exposure follows the crops named. Thailand is especially linked to sugar, while Indonesia and Malaysia face risks to palm oil. Vietnam’s robusta coffee is also exposed. The article separately identifies the Philippines and Thailand among countries most exposed to hydropower drought, showing that agricultural and electricity risks can overlap.

The danger is regional, not limited to one harvest. BMI expects Southeast Asia to face a sharp rise in drought risk after the El Niño. It also says the region could have the largest population impact, with about 90 million additional people exposed to drought on average during past El Niño events.

The human impact could be especially large in Southeast Asia. BMI says the region experienced around 90 million more people exposed to drought on average during past El Niño events. That is the largest population impact identified in the report, making drought a major public risk as well as an agricultural problem.

The report also measures how much cropland faced high-intensity drought. Across Southern Africa, Central America, northern South America and Southeast Asia, the exposed share rose by 11–12 percentage points on average in past El Niño events. This measure shows a substantial expansion of severe drought conditions across productive land.

The figures describe past-event averages, not a precise forecast for 2026–2027. Still, BMI expects Southern Africa and Southeast Asia to face the sharpest rise in drought, heat and power risks. Greater exposure could threaten food production, livelihoods and electricity reliability if similar patterns occur.

Hydropower depends on water moving through dams and turbines. When drought reduces rainfall, rivers and reservoirs receive less water. Lower water levels reduce the amount of electricity plants can generate, especially during periods of high demand. This makes drought a direct threat to power reliability.

BMI says Southern Africa faces the greatest drought risk to hydropower, followed by Mexico and Central America. In past El Niño events, the share of hydropower capacity exposed to high-intensity drought rose by around 19 percentage points in Southern Africa. Zambia and Zimbabwe led that regional exposure, while Southeast Asia also faced higher risk.

The consequences depend on each country’s electricity mix. Where hydropower dominates, reduced generation can cause load-shedding, costly power imports and financial pressure on utilities. Elsewhere, drought may create peak-power constraints instead of system-wide shortages, particularly when hydropower supplies less than 20 per cent of generation.

Drought can weaken hydropower output, but its effect on the whole electricity system depends on how important hydropower is in the generation mix. Malaysia, Thailand and the Philippines have notable exposure to hydropower drought, yet hydropower supplies less than 20 per cent of their electricity generation, according to BMI.

That limited share provides some protection against broad shortages. Other generation sources can continue supplying much of the system when hydropower output falls. However, lost hydropower still removes useful capacity, especially when households and businesses use the most electricity. The result can be tighter margins during demand peaks.

BMI therefore expects impacts in these countries to appear mainly as peak-power constraints rather than system-wide shortages. Indonesia, South Africa and Mexico are listed in the same group. This does not remove the risk, but it changes how the pressure is likely to be felt: through stressed peak periods instead of widespread blackouts.

Zambia and Zimbabwe are especially vulnerable because hydropower plays a dominant role in their electricity systems. When El Niño-related drought reduces rainfall and water availability, their hydropower plants can generate less electricity. A large supply gap then appears quickly because fewer alternative sources can replace the lost output.

The report says the share of hydropower capacity exposed to high-intensity drought rose by around 19 percentage points on average in Southern Africa during past El Niño events. Zambia and Zimbabwe led that exposure. Their systems therefore face both a strong climate shock and heavy dependence on a drought-sensitive power source.

BMI says these countries face the highest risk of load-shedding, costly imports and pressure on utility finances this season. Utilities may need to restrict supply or buy replacement electricity at high cost. Those responses can worsen financial strain while households and businesses experience less reliable power.

The article does not explain the atmospheric mechanism in detail. Established climate science describes El Niño as warmer-than-usual tropical Pacific waters that alter the normal pattern of rising air, sinking air and winds. Because the tropical Pacific strongly influences atmospheric circulation, the effects spread far beyond the ocean.

During El Niño, stronger cloud formation and rainfall tend to move toward the warmer central and eastern Pacific. Air sinking over parts of the western Pacific can suppress clouds and rain around Southeast Asia. Less rainfall, combined with higher heat, dries soils, reduces river flows and raises drought pressure. The exact effects vary by location.

This helps explain the article’s regional pattern. Southeast Asia faces threats to rice, sugar, palm oil and coffee, along with higher hydropower risk. BMI also identifies Southern Africa, Central America and northern South America as highly exposed. For 2026–2027, these circulation changes could amplify agricultural and electricity risks.