Deadly floods in Europe: how much will it cost?

The economic losses from the latest floods in Central Europe are considerable. Initial estimates suggest that the cost of the current floods alone could exceed €1 billion, but the precise costs have yet to be calculated as torrential rains from Storm Boris continue to batter the region, leaving a growing death toll and widespread damage.

According to one estimate, the bill could range from several hundred million euros to more than a billion euros, Reuters reports, citing initial estimates from ratings agency Morningstar DBRS.

Mario De Cicco, vice president of global insurance and retirement ratings at Morningstar DBRS, told Euronews Business that “based on the latest available information, the highest insured losses could occur in the Czech Republic, one of the countries most affected by the recent bad weather,” adding that insurance for natural disasters is more widespread in the country than in other affected countries.

Which countries are affected?

In Europe, flooding is already the most expensive natural hazard, according to UK environmental consultant JBA Risk Management. River flooding alone costs €7.8 billion each year and this figure is expected to rise as economies continue to grow in high flood risk areas and climate change brings heavier and more intense rainfall.

This time, floods have submerged parts of Austria, the Czech Republic, Poland and Romania, and are also expected to affect Slovakia and Hungary.

Hundreds of millions of euros in emergency funds have been released by the Polish, Romanian and Austrian governments, and the Czech government is considering changing its 2024 budget due to flood damage.

Overall, damage to infrastructure, buildings and property, as well as increased rescue and relief spending, may also trigger a decline in production and economic activity, according to Grzegorz Dróżdż, market analyst at Conotoxia Invest.

“These factors generally have a negative impact on budgets. and trade, which is manifested by an increase in the deficit and a deterioration in the trade balance, due to a decrease in exports and an increase in imports.”

“The floods that Poland, the Czech Republic and Austria are currently facing will certainly be very painful and costly for the population and will have a negative impact on already strained budgets”added Mr. Dróżdż.

How are businesses affected?

Poland’s largest insurer, PZU, is facing a 10% drop in profits due to weather-related claims, Bloomberg reports, citing data from brokerage Ipopema.

Some of the factories and shops affected by the flooding have shut down their production lines, including the BorsodChem chemical plant in Ostrava, Czech Republic, Czech Republic-based drinks maker Kofola CeskoSlovensko, and the OKK Koksovny coking plant – one of Europe’s largest producers of foundry coke – has stopped its production of chemicals, Reuters reported.

Cross-border rail services have been suspended between Poland and the Czech Republic, as well as between Hungary and Austria.

Long-term economic outlook

As for the overall impact on the economy, Erste Group analysts expect a limited impact, adding that it is too early to say for sure.

Katarzyna Rzentarzewska, chief macroeconomic analyst for Central and Eastern Europe at Erste Group, told Euronews: “For example, in the Czech Republic, the combined economic impact from damage to property and production could be 0.2-0.5% of GDP, with the overall impact on GDP growth being much smaller and likely at the lower end of this range.”

She expects that in the short term (by the end of the year) the industrial sector will receive a negative boost in all countries affected by the floods and that tourism in these regions will also suffer. “Finally, crop damage could have inflationary effects”said Ms. Rzentarzewska.

Analysts also agree that in the long term the situation is quite different, as the restoration work will give a boost to the construction sector, “which will increase GDP in the medium term”said Ms. Rzentarzewska.

“It can also stimulate new investments in modern technologies, as well as more resilient and developed infrastructure.”said analyst Grzegorz DróżdżDróżdż.