East Europe Floods No Menace for Growth Outlook, Erste Says

Central and east European flooding will have a “negligible” impact on regional economic growth as advance preparations helped curb damage after devastating floods 11 years ago, Erste Group Bank AG analysts said.

Economic damage caused in recent weeks are “only a fraction of those in 2002, which amounted to about 6 billion euros ($8 billion)” for Austria, the Czech Republic, Hungary and Slovakia, Juraj Kotian, a Vienna-based fixed-income analyst said in an e-mailed note today. “The negative short-term impact on gross domestic product is negligible as production outages were limited, with no major production plant being hit in CEE,” and agriculture-related losses unlikely to exceed 0.1 percent of GDP, according to the note.

Swollen rivers including the Danube and the Vltava sparked the worst floods since 2002 in the region and Germany. Overflowing rivers killed 10 people in the Czech Republic while tens of thousands had to evacuate to escape the water that inundated cities and towns, shut down factories and disrupted rail, road and river traffic.

Post-flooding repairs will have a slightly positive effect on GDP in upcoming quarters, and governments are likely to invest in flood-protection systems over the coming years, Kotian said. Erste analysts aren’t changing their full-year GDP forecasts, he said.

Erste sees the Hungarian economy expanding 0.2 percent this year, projects a 0.3 percent contraction in the Czech Republic and 0.5 percent economic growth in Slovakia.

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