Countries, businesses brace for economic impact as Storm Boris ravages Central Europe

Central Europe is facing devastating economic losses following the catastrophic floods caused by Storm Boris, with preliminary estimates suggesting the damage could surpass €1 billion.

The full extent of the costs remains unclear as torrential rains continue to impact the region, leaving behind a rising death toll and widespread destruction.

According to early assessments by Morningstar DBRS, the bill could range from several hundred million euros to over a billion euros.

However, as the storm continues to batter the region, the final figure may increase significantly.

How countries are getting impacted

Flooding is the costliest natural hazard in Europe, and it continues to cause significant damage year after year.

According to UK environmental consultant JBA Risk Management, river flooding alone costs the continent an estimated €7.8 billion annually.

As economies expand in flood-prone areas and climate change intensifies precipitation, the risks and costs are expected to rise.

This latest round of flooding has impacted several countries, including Austria, the Czech Republic, Poland, and Romania.

Slovakia and Hungary are also expected to suffer from the ongoing effects of Storm Boris. Governments across the region are already responding by releasing hundreds of millions of euros in emergency funds.

The Polish, Romanian, and Austrian governments have all pledged relief, while the Czech government is considering altering its 2024 budget to accommodate flood-related damages.

Polish Prime Minister Donald Tusk is channeling 1 billion zloty ($260 million) to flood-affected areas, as well as appealing to the European Union for financial help.

Grzegorz Dróżdż, a market analyst at Conotoxia Invest, outlined in a Euronews report, how the damage could affect national economies. He said,

He added that the flooding could have long-term effects on production and economic activity, with repercussions for already strained national budgets.

Source: BBC

Czech Republic to see highest insured losses

Experts feel the highest insured losses could come from Czech Republic, according to available data, with the country being one of the most impacted.

In the Czech Republic alone, insured losses from the floods are expected to reach CZK 17 billion, according to estimates from the Association of Insurance Companies.

Half of the damage is attributed to businesses, while households account for the other half.

The prevalence of natural disaster insurance in the Czech Republic is expected to drive significant claims from affected regions.

ING estimates that the overall damage could represent 0.5% of the country’s nominal GDP, with insured damage accounting for 0.2%.

The government is expected to bear a cost equivalent to 0.3% of GDP, or around CZK 24 billion.

The final bill for the flooding could impact the planned government budget for this year, ING said.

The Ministry of Finance has indicated it could possibly alter the budget. Some funding for critical events is already budgeted, while some resources can probably be obtained from the EU funds.

David Havrlant, chief economist at ING, Czech Republic, said,

Impact on businesses

Businesses across the region are already feeling the effects of the floods. Poland’s largest insurer, PZU, is expected to see a 10% reduction in profits due to weather-related claims, according to data from Ipopema brokerage, cited by Bloomberg.

In addition to insurance, industries such as manufacturing and chemicals have also been disrupted.

BorsodChem, a chemical plant in Ostrava, Czech Republic, had to shut down production lines due to flooding.

Similarly, Kofola CeskoSlovensko, a Czech drinks maker, and OKK Koksovny, one of Europe’s largest producers of foundry coke, also halted production.

Reuters reported that the floods have caused severe disruptions across these industries, further compounding the economic impact.

The transportation sector has not been spared either. Cross-border rail services have been suspended between Poland and the Czech Republic, as well as between Hungary and Austria.

The halt in transportation services is likely to have a knock-on effect on trade, supply chains, and business operations throughout the region.

Long-term economic prospects may be more positive

While the immediate impact on national economies will be severe, analysts believe that the long-term picture may be more positive.

Restoration work is likely to provide a significant boost to the construction sector, with large-scale infrastructure projects driving economic growth.

Katarzyna Rzentarzewska, Chief CEE Macro Analyst at Erste Group, told Euronews,

She expects the industrial sector in all affected countries to experience a short-term downturn as a result of the flooding.

In addition to industrial production, sectors like tourism and agriculture may suffer from the damage caused by the floods.

"Finally, the damages to crops may have inflationary effects," Rzentarzewska warned, pointing to potential disruptions in food supply chains.

In the long term, however, the rebuilding efforts could help stimulate new investment, especially in more resilient infrastructure, which may lead to stronger growth in the future.