Economic Vulnerability to Climate Change in Lower-Middle-Income Asian Economies

Abstract

The study is directed at determining the vulnerability of lower-middle-income Asian economies to climate change from an economic perspective and indicating that limited financial capacity, institutional fragility, and high exposure to climate and water stress together to uplift the extent of macroeconomic losses. For the analysis, the Pooled Mean Group–Autoregressive Distributed Lag (PMG-ARDL) method is utilized, covering the timeframe of 1971 to 2024 for the three representative lower-middle-income Asian nations, and the projections are further extended to 2100 within the Shared Socioeconomic Pathways (SSP) framework. The empirical findings indicate that the temperature increment of 1°C results in approximately 5.0031% decrease in GDP growth, with the average long-run macroeconomic deceleration being 2.74%. The forward-looking simulations suggest that by 2100 the cumulative GDP losses could amount to 74% under the high-emission SSP8.5 (business-as-usual) scenario, while the global warming potential under SSP1.9 could be of 40% in terms of growth. The findings underscore the fact that lower-middle-income economies, whose fiscal buffers and adaptive capacity are weak, are turn out to be the most vulnerable to climate-initiated economic shocks. The paper finally holds the view that the securing of economic stability and the advancement of sustainable growth in the vulnerable regions of Asia depend on the adaptation financing, institutional resilience, and green investment being specifically targeted.