WASHINGTON (Reuters) – Hurricane Harvey could be one of the five most expensive storms in the United States, with dams and dams that have resulted in forecasts of losses, the current data model showed on Tuesday.
Estimates of total economic costs and damages increased to more than $ 42 billion, compared with $ 30 billion, as floods began to spread to Louisiana and flood control measures were Chuck Watson, founder of the disaster modeling company Enki Research.
Although authorities were still focused on rescuing survivors Tuesday, the issue of the storm’s downfall – and its enduring success for the Texas and US economies – was just beginning.
“If Harvey were your normal hurricane, it would probably be a $ 4 billion event,” Watson told AFP. “It would be tragic for those affected, but because of the effect on macroeconomics, we would not talk at all.”
But $ 42 billion in unrecoverable economic losses, Harvey would be as dangerous as Hurricane Ike, which affected Texas and parts of the Caribbean at a cost of $ 43 billion in 2008, and Hurricane Wilma, destroyed North America in 2005, costing almost $ 38 billion, according to Watson estimates.
And this figure could increase even more. A US energy hub with annual economic output of $ 1.6 trillion, Texas accounts for almost nine percent of US GDP, the second largest state economy after California, and larger than either Canada or South Korea.
Goldman Sachs estimated on Monday that Harvey’s disruption in the energy sector could only cut 0.2 percentage points of US GDP growth in the third quarter of this year.
“However, we emphasize that the hurricane’s overall impact on growth in the second half is uncertain,” analysts said in a research note.
And despite the losses, they point out that “the negative effects are likely to be offset by an increase in commercial activity and construction activity once the storm has passed.”
The Texas Gulf Coast, home to nearly a third of US refining capacity, has been devastated by the most powerful hurricane that has hit the state since 1961, closing off oil and refinery platforms including the giant ExxonMobil Baytown.
And according to Barclays, early Tuesday, nearly 40 percent of US petrochemical capacity was off-line or closed.
In addition to oil and gas producers, Texas is home to defense contractors, computer components manufacturers, manufacturing and a large agricultural sector that produces livestock, cotton, grains and fruits.
Natural disasters such as floods and hurricanes can force whole cities into unemployment, disrupt tax collection, cut off food and fuel supplies for months, increase costs, and reduce demand elsewhere.
Reconstruction efforts following major disasters can ultimately stimulate local economies as workers mobilize to clean and repair homes and infrastructure, thereby boosting employment growth.
However, according to the Insurance Information Institute, only 12% of homeowners in designated flood areas in the United States were covered by flood insurance in 2016. In the south, the figure rose to 14% .
“It’s really a devastating situation, not only from the meteorological point of view, but from the financial point of view for these people,” Loretta Worters, a spokeswoman for the institute, told AFP.
Those without insurance could look at the ruin without the help of the government, he said. “This could be a total loss for them.” Worters said the insurance industry currently covers a surplus of $ 700 billion, which means it can comfortably satisfy early claims.
But Enki Research’s Watson said federal letters designating flood prone areas – where homeowners are generally required to get flood insurance – are inaccurate and outdated, which means that the proportion insured of the damage caused by Harvey will be minimal.
“Our initial estimate is that two thirds of the floods occurred outside the flood zones,” he said.