Central Europe faces devastating economic losses after the storm Boris floods, which caused catastrophic flooding. According to preliminary estimates, the damages could exceed EUR1 billion.
As torrential rainfall continues to affect the area, the full cost remains unknown. The death toll is rising and the destruction has been widespread.
Morningstar DBRS has made early estimates that the cost could be anywhere from several hundred millions to more than a billion euro.
The final number may rise significantly as long as the storm continues.
What countries will be affected?
The costliest natural disaster in Europe is flooding, which continues to do significant damage every year.
According to UK environmental consultants JBA Risk Management river flooding costs the continent approximately EUR7.8bn annually.
The risks and costs will increase as economies grow in areas prone to flooding and climate changes intensify precipitation.
The latest flooding in several countries has affected Austria, Poland, Romania, and the Czech Republic.
The ongoing impacts of Storm Boris are expected to affect Slovakia and Hungary as well. The governments of the entire region have already released hundreds of millions in emergency funds.
All three governments – the Czech, Romanian and Polish – have pledged to provide relief. The Czech government, however, is considering a budget change for 2024 in order to account for flood damages.
The Polish prime minister Donald Tusk has allocated 1 billion Zloty ($260 Million) for flood affected areas and appealed to the European Union to provide financial assistance.
Grzegorz Drozdz, a Conotoxia Invest market analyst, explained in a Euronews article how this damage can affect the national economy. He stated,
These factors have a negative effect on trade and budgets, manifested by an increase in deficits, and worsening trade balances due to the decrease of exports.
The flooding, he said, could have long term effects on the economy and production. This would affect already stretched national budgets.
Source: BBC
Czech Republic has highest insurance losses
According to data available, experts believe the Czech Republic could have the largest insured loss. The country is one of the worst impacted.
According to the estimates of the Association of Insurance Companies, the insured losses in the Czech Republic from floods will reach CZK17 billion.
The damage caused by the storm is split between businesses and households.
Natural disaster insurance is prevalent in Czech Republic, and it’s expected that the affected areas will make a lot of claims.
ING estimated that total damage to the economy could be 0.5%, while insured damages would only account for 0.2%.
Costs are expected to be around CZK24 billion, which is 0.3% of the GDP.
ING stated that the final cost of the floods could affect the government’s budget this year.
According to the Ministry of Finance, it is possible that they could alter their budget. A certain amount of funding has already been budgeted for major events, and some funds can be accessed from EU funds.
David Havrlant is the chief economist of ING in Czech Republic.
In the short term, we may be able to see an increase in consumer prices due to a higher demand for durables as consumers replace their damaged appliances and vehicles. Construction work is likely to increase prices.
Businesses and the impact of climate change
Floods are having an impact on businesses across the area. According to Bloomberg, Poland’s biggest insurer PZU is likely to suffer a 10% loss in profit due to claims related to the weather.
Other industries, such as chemical manufacturing and manufacturing, have been affected.
BorsodChem in Ostrava (Czech Republic) had to close production lines because of flooding.
Similar production halts were also made by Kofola CeskoSlovensko (a Czech beverage maker) and OKK Koksovny (one of Europe’s biggest producers of foundry coal).
Reuters reports that floods caused major disruptions in these industries and have further exacerbated the impact on the economy.
Transport has also been affected. Rail services between Poland, the Czech Republic and Hungary as well as Austria have been suspended.
Transport services will likely be suspended, which could have an impact on business, trade and supply chains in the entire region.
The long-term outlook for the economy may be better
Analysts believe the longer-term impact of the crisis on the economy may be positive.
The construction industry will benefit from restoration work, as large infrastructure projects are driving the economy.
Katarzyna Rzentarzewska, Chief CEE Macro Analyst at Erste Group, told Euronews,
Restoration work, along with modern technologies and resilient infrastructure, will help to boost the GDP in the mid-term.
As a result, she expects a temporary downturn in the industrial sector of all countries affected by the floods.
Floods can also cause damage to tourism, agriculture and other sectors.
Rzentarzewska, warning of possible disruptions to food chains, warned that “finally, damages to crops could have inflationary effect”.
Long-term, rebuilding could stimulate investment in new infrastructures, including more durable ones, and lead to a stronger future growth.
This article Countries and businesses prepare for the economic impact of Storm Boris as it ravages Central Europe first appeared on The ICD
