Does Water Stress Impact GDP Per Capita Growth in the Long Run: A Study of Highly Water-Stressed Nations Over the Period

Abstract

Water scarcity is becoming a bigger issue worldwide, and how we manage water has become a major concern for governments in many countries because it is important for economic growth and societal stability. The purpose of this study is to analyse the effects of water stress on the gross domestic product per capita growth (GDPpcg) of the 16 highly water-stressed countries belonging to the Middle East and Africa over the period of 2001–2020. The study utilizes panel data approaches/methods such as pooled, fixed effect (FE), and random effect (RE). The overall empirical findings indicate that water stress and population growth are negatively associated with GDPpcg in these highly water-stressed nations. The total water productivity and annual freshwater withdrawals (billion cubic meters) are positively associated with the GDPpcg in these highly water-stressed nations. Results support the impact of demographic profiles, such as age distribution having a positive effect on GDPpcg, whereas, in FE estimation, population density has a negative impact on GDPpcg. This study comprehensively analyses the multifaceted relationship between water stress and GDP per capita growth. Policymakers may consider prioritizing investments in water-efficient technologies, infrastructure development, and agricultural practices to mitigate the adverse effects of water stress on economic growth.