Floods push down zloty
By : Juliet D. Golden
The floods that ripped through southern Poland last week killing nine people and forcing some 10,000 to evacuate their homes, pushed the slowly stabilizing zloty into a downward curve amid government promises of massive assistance programs.
This latest emergency follows severe flooding earlier this month in Gdansk, which left 200 homeless and caused an estimated zl. 200 million ($47.6 million) in damages. Last week's flooding is the worst to hit Poland since 1997 when floodwaters killed 55 and caused damages exceeding $2 billion ($625 million).
However, authorities last week said that despite local devastation, on a nationwide scale damages so far this year are expected to be much lower than those four years ago.
"If you look at the situation through the eyes of the victims, there is no difference, because there are people whose houses are sitting in a meter and a half of water," said Witold Maziarz, spokesman at the National Firefighters Headquarters (KGPSP). "But these are only dangerous points in the context of the entire country. This is not the same scale as the flooding in 1997. The water came and flooded everything."
"On a scale of one to 10, this is one-tenth of the scale of 1997," he said.
According to the World Bank, flooding in July 1997 impacted 40% of Poland's population. At that time, about 56,000 buildings and 500,000 hectares of land were hit by floodwaters.
Gazeta Wyborcza estimated last Friday that damages in the Malopolskie and Swietokrzyskie provinces had reached about zl. 800 million ($190.5 million).
Prime Minister Jerzy Buzek visited Krakow last week and met with residents threatened by flooding. The government has promised more than zl. 300 million ($71.4 million) in assistance to help compensate flood victims and kick-start flood recovery measures.
With floodwaters moving north in both the Wisla and Odra river basins, analysts last week said that it was too early to say exactly how the recent disasters might impact the economy. Based on the experience from 1997, flooding should not impact economic growth targets for this year.
"In 1997 the losses were severe both in agriculture and in the cities, but this is not reflected in the gross domestic product (GDP)," said Mateusz Szczurek, economist at ING Barings in Warsaw. "On the contrary the GDP showed very strong growth because the demand for services and the demand for rebuilding what was lost was quite strong."
GDP in the second quarter of 1997 was 7.5%. Economic growth slowed to 6.7% in the third quarter and 6.4% in the fourth quarter. "It did not have any impact on economic growth," Szczurek said. "If anything it kept it high."
At present GDP is about 2%. Some economists predict that the figure will rise to above 4% in the third quarter. "This is obviously not only from the floods, but we expect a rebound in domestic demand that will more than offset a relative slowdown in Polish export growth," Szczurek said.
The big question will be how financial markets react to news of flood damage. In 1997 the zloty fell by about 10% over the course of a week from zl. 3.30 against the dollar registered on July 10 to zl. 3.60 on July 16 in part caused by flooding and in part by a financial crisis in the Czech Republic.
"The impact on the markets might be, in the numbers at least, more pronounced." Szczurek said. "In 1997 we saw a huge zloty depreciation in July, which was partially caused by Czech depreciation at the time, plus the huge strain on the budget coming from the floods."
On Friday morning the zloty fell against the dollar. According to Reuters, late Thursday's figure of zl. 4.19 to the dollar dropped to zl. 4.23 on Friday by press time.
