Hurricane Harvey could see Houston lose $60bn of GDP
Houston city’s economy could lose up $60bn of its gross domestic product (GDP) output as a result of flooding caused by Hurricane Harvey, according to the Centre for Risk Studies at the Cambridge Judge Business School. Lost economic output could exceed the physical damage costs, the centre said.
The GDP loss has been calculated by the Centre for Risk Studies’ models. It is based on lost sales, revenues and economic output for businesses and their trading partners because of extensive flooding in Houston. Prior to the flooding, Houston was expected to have GDP of $316bn in 2017.
The centre said the impact on the economy could escalate “significantly’ beyond these estimates if flood waters disrupt business activities for lengthy periods, recovery is slow or delayed, or there are major follow-on catastrophes such as oil or chemical pollution or explosions.
Simon Ruffle, director of research and innovation at the Centre for Risk Studies, said: “In addition to loss of human lives and physical destruction of property, the flooding will disrupt the city’s economy, which will in turn influence the region’s economy, with potential consequences for the US economy and internationally. The loss of expected output is the likely result of the closure of workplaces, the disruption of the labour force, the loss of power and water supply, the suspension of airport and port traffic and additional consequential economic effects such as demand shock and post-event inflation.”
The risk centre assesses Houston as a highly resilient economy, capable of harnessing and attracting economic investment for recovery. Businesses are well positioned to repair much of their physical damage, while the city is well governed and socially cohesive, it added.
“These factors suggest that the economy is likely to bounce back within a year or two of the catastrophe,” said Mr Ruffle.
Houston’s economy is mainly based on service industries. It is historically the world’s oil industry capital, but is increasingly the home of technology, software, biotech and aerospace firms.
Flooding from Hurricane Harvey brought much of the city’s economic activity to a halt. Two major airports were closed. ExxonMobil and Royal Dutch Shell shut down their oil refineries in Baytown and Deer Park. The water purification plants of the city are submerged, with water and power loss restricting activities even in areas with no flooding.