Hurricane Ian’s $50 billion in damages could wreak havoc on the United States gross domestic product (GDP), say numerous economic experts.
Hurricane Ian is one of the most expensive natural disasters of the past few years, Moody’s Analytics Economist Laura Ratz tells CNN Business. Several areas in Florida that are important for the local tourism industry were either destroyed or devastated, namely Sanibel, Captiva, Fort Myers Beach, and Naples.
The damage is so severe that third quarter economic growth in both Florida and South Carolina, where substantial damage also occurred, is suspected to drop two or three percentage points. It could also impact the national GDP, says Gregory Daco, Chief Economist with Ernst & Young Parthenon, because of power outages, canceled flights, and disruptions to local services or local products such as crops or refinement.
There are more than 4,600 facilities in southern Florida alone that process 74,000 different types of car parts for companies such as General Motors. This could result in a drop of up to 0.3 percentage points, and growth could also be contracted into the fourth quarter. It could even be permanent if reconstruction efforts aren’t enough to reignite tourism.
“We have to be careful about this so-called ‘broken window fallacy’ — this idea that if you break a window because you have to repair it, you’re essentially generating output,” Daco told CNN Business. “That does not hold in the case of a natural disaster in any form.”
Tourism makes up 20% of Florida and South Carolina’s GDP, and accounts for 40% of jobs, according to Matthew Martin, a U.S. Economist with Oxford Economics. As for supply chain stress, Martin says that experts shouldn’t worry, as Florida and Charleston, South Carolina ports only process about 10% of total U.S. imports. Some have already resumed operations, and others are well on their way to reopening.