PRAGUE, Nov 7 (CTK) - Despite the fact that the Aug floods and their consequences were very serous, their economic impact should not be fundamental, the Czech National Bank CNB says in its report on inflation released today.
"The impact of the floods on the overall GDP growth in the years 2002 and 2003 should be relatively weak," the report reads.
This year the floods are likely to lower GDP growth by around 0.2 to 0.3 percentage point. This fall, however, should be offset by a similar growth a year later. Unemployment may also slightly grow this year but the impact on inflation should be very small.
The government puts overall flood damage at around Kc70bn, with the hardest hit being the chemical, food, mining and energy industries.
This year the floods may slow down the growth of industrial production due to damage caused to production capacities and to temporary shortfalls in sales. In contrast, the impact on agriculture should not bee too marked because only less important agricultural areas were flooded and moreover, the harvest was at an advanced stage at that time.
Negative impact on demand was seen in particular in the third quarter and, in the short term, exports may have fallen as well. Domestic demand is expected to grow next year because the affected entities will get compensations from insurance companies. This should be an extra impulse for the growth in household consumption, the report says, adding that investment activities could rise as well.
With regard to public finances, this year and in 2003 a partial shortfall in revenues from direct and indirect taxes to the value of around Kc2bn annually can be expected, the report says.