Friday, September 02, 2005
MercuryRising Damage Estimates Scoop Business Press
You read it here long before you read it in the financial news. The economic costs of the damage to New Orleans are going to be staggering.
The low end estimate: Katrina and the flooding of New Orleans will probably cost more than $100 billion in total economic losses, Risk Management Solutions, a leading catastrophe risk-modeling firm, said on Friday. At least half of those losses will be triggered by the failure of levees surrounding New Orleans... Every day that economic activity is disrupted will cost more than $100 million, the firm warned.The value of physical property in the flooded areas is approximately $100 billion, RMS estimated.
And the longer the water sits, the more total the damage.
But not so fast. The costs could be much larger: The storm will likely reduce economic growth by at least 0.5% in the third quarter and 1% in the fourth quarter, and perhaps much more. In contrast to previous hurricanes and disasters, much of this loss will not be recouped is subsequent quarters. Rebuilding will be much delayed, and the impact on neighboring regions will be larger and longer lasting.... the economic consequences of loss of the port of New Orleans will be greatly compounded by the loss of east-west transportation routes, for example, across the Mississippi. Lost east-west transportation infrastructure will handicap shipments of the full range of goods into and out of the southeast and east to west, across the Mississippi. Multiplier effects in the services sector will be considerable.
A 1 percentage point drop in GDP growth is roughly $100 billion on an annualized basis. So, this guy is talking about $37-plus Billion in immediate losses [whereas RMS thinks it will be more in the $10-$20B range). But unlike most recessionary losses, which are recouped by a later economic surge, this sort of loss could be permanent.
So, there you have the first solid, published estimates. Up to $100 Billion in property damage in New Orleans alone. Somewhere between $10 and $40B in economic losses.
Oh. And the rail yards caught fire.
With Nero at the head of this orchestra, my S.W.A.G. of $150 Billion may yet prove to have been optimistic.
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Brad DeLong posted an estimate at 3:30 Pacific time on September 1st.
Mine was at about noon, Bloggertime, which I think might also be Pacific.
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Mine was at about noon, Bloggertime, which I think might also be Pacific.
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