That's the early read regarding onshore / offshore property and infrastructure damaged caused by Hurricane Gustav, with losses pegged at $4 billion to $10 billion, according to estimates by Risk Management Solutions. In contrast, Hurricane Katrina in 2005 caused about $50 billion in damages.
Risk Management said losses from Gustav were lessened by the fact that the storm weakened, and hit the coastline as a Category 2 hurricane, and the fact that it came ashore about 70 miles southwest of New Orleans. Those factors, combined with better preparation by companies with vulnerable property in the area, will result in lower damages totals, Risk Management said.
However, RMS was quick to point out that the $4-10 billion damage total does not include loses from flooding in New Orleans that could occur in the days ahead.
Gustav: Little U.S. GDP impact
Economist David H. Wang, who runs U.S. GDP models each quarter, said Tuesday he expects "only a minimal U.S. GDP impact from Gustav."
"Of course human safety is the primary concern. But regarding regional GDP, the Southeast U.S. will incur a 0.1-0.3% GDP reduction in the third quarter from the hurricane, but the overall impact on U.S. GDP will be minimal," Wang said.
Further, Wang said in Q4 and Q1 2009, the Southeast U.S. may see "a mild, regional GDP boost as rebuilding and repair work starts" but Wang underscored that hurricanes are not to be interpreted as positive events. "No one wants to see loss of lives and injuries, which is why we must do everything possible to limit the damage and trauma caused by these storms," he said.
In addition, Wang argued that those who are dismissing the New Orleans / Southeast U.S. as too risky, solely due to the seasonal hurricane threat, may be making a mistake.
"One thing Gustav has shown is that hurricane preparedness has improved since Katrina, and that the area is resilient," Wang said. "Also, every region of the U.S. problems. The West has fires and occasional earthquakes, the Northeast and Midwest can get 8-10 snowstorms a year and ice storms, and the South has tropical storms. So to say the Southeast is less suitable for business and investment opportunities is not accurate or fair."
Economic Analysis: The above also is all the more reason why the new U.S. Congress must increase the U.S. Army Corps Of Engineers' budget so that it can finish its levee-strengthen projects sooner than the current 2011 target date. No region can escape a Category 4 or 5 storm unscathed, but levee-strengthening will limit the damage, as the impact of Hurricane Gustav demonstrated.
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