ING analysts see the overall flood damage from this year's floods at 0.5% of Czech nominal GDP, while the reported estimate of insured damage accounts for 0.2%. The cost may impact this year's budget and medium-term inflation
The floods of 2002 represent a natural disaster that caused the most damage in Czechia in modern history. The Czech National Bank's 2002 annual report assessed the impact on GDP and inflation as small, with the floods not significantly affecting the Board's decision. The macroeconomic impacts, including fiscal ones, were deemed unlikely to be substantial. The report envisaged a slowdown in real GDP growth of between 0.2 and 0.3 percentage points in 2002 while providing an additional positive impulse for the next year, roughly of the same magnitude but with a positive sign.
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Experts look at the floods from 2002 and 2013 to quantify and compare the expected impact on the Czech economy. The recent floods seem less damaging than the devastating event of 2002 in terms of economic cost, yet more severe than the 2013 floods. At the same time, several factors prevented higher losses compared to previous floods. Meteorologists provided early warnings, which proved to be very accurate. The individual river basins responded by releasing dams to accommodate the massive water influx. The infrastructure was better prepared than at any time before.
Insured losses from this year's floods are about to reach CZK 17bn, according to the first estimates of the Association of Insurance Companies. Approximately half of the damages are incurred by households and the other half by businesses. Individual insurance companies are gradually collecting client reports, expecting tens of thousands of claims.
Given the timely warning, more advanced flood control measures, and good organisation before and during the catastrophe, analysts expect the economic damage to be closer to the 2013 flooding.
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