By Will Bugler
The full economic impact of hurricanes Harvey and Irma is not yet known, however early estimates are eye-wateringly high. Total economic costs to the region could top US $300 bn (£227 bn) with insurers, small business owners, energy companies and farmers taking the largest hit. The US economic growth forecast was revised down by 0.8%, with Goldman Sachs now predicting the national GDP to grow by 2% in the third quarter. The economic impact for the small island states of the Caribbean is far more devastating, with hurricane Irma destroying 95% of homes on the islands of Barbuda and Sint Maarten.
The insurance industry will bear the brunt of many of the costs in the US, while in the Caribbean where there is less market penetration, governments and citizens will be left footing the bill. The insurance industry is still assessing the cost of Hurricane Harvey, which caused severe flooding in parts of Texas, as over 130 cm (50 inches) of rain fell in just a few days. Initial estimates suggest the insured costs could be as much as US$100 bn.
With Irma causing further devastation in the region, costs could yet rise further. Speaking to The Guardian newspaper, Barrie Cornes, an analyst at the stockbroker Panmure Gordon, said that the overall economic cost could reach US$ 300 billion, US$ 100-150 billion of which would be insured losses.
The increase in severity of storms in the region has already reshaped the insurance market in Florida. Previous storms in the mid 2000s, including Hurricane Katrina, have meant that many of the larger national companies have left the area. Florida’s insurance market is now dominated by smaller firms who are less able to cope with large-scale pay-outs of this sort.
Over a dozen oil refineries were at least partially out of action a full two weeks after hurricane Harvey hit Texas. Estimates suggest that about 2.4 million barrels of refining capacity was offline – 13% of the US’s total refining capacity.
There was an immediate impact on fuel prices in the Caribbean and the US, where prices rose by 30 cents per gallon, reaching US$ 2.67 per gallon in early September. The impacts were felt in other countries too, with fuel prices in the UK rising by 2 pence per litre.
Irma and Harvey’s greatest impact was to property. Homes and businesses across the region were destroyed or damaged, with near total-destruction reported on several Caribbean islands including Barbuda and Sint Maarten. In the US analysts estimated that US$ 2 trillion worth of property was in Irma’s path.
The full extent of the damage to crops on Caribbean Islands is not yet known, but many island economies are highly depended on agriculture, and often on just one or two crops. In the US estimates suggest that 40% of Florida’s valuable citrus crops have been wiped out. Florida is the world’s second largest producer of orange juice. The damage to agriculture in the region has both short-term impacts, pushing food prices up, and leaving farmers with considerable losses, and causes long-term disruption as many crops take several years to establish.
Almost half of Florida’s homes and businesses remained without electricity after hurricane Irma had rolled over the state, and power restoration remains one of the most important issues to help business recovery rates. In the Caribbean islands such as Puerto Rico is facing long-term power outages, as Irma left 1 million people without electricity – almost a third of the population. Small businesses are also struggling to re-open as many of their employees have suffered considerable damage to their homes and cars.