Polski
Business and economics, Issue 7/2026
It’s not just flooded homes. Floods could destabilize the economies of Poland and Europe
Aug
Flood-related losses in the first quarter of the 21st century cost Europe 226 billion euros. This is by far the costliest natural disaster to have struck our continent in recent decades. Its effects may continue to weigh heavily on the economy in the coming years as well. A new report from Allianz SE indicates that the only effective way to protect against such events is through prudent investments.
The number of floods is comparable year over year, but their costs are rising
Since 2000, an average of 46 floods have been recorded each year in Europe. Although the number of disasters has not increased significantly, their costs have been rising steadily. In the first decade of the 21st century, they totaled 63.2 billion euros; in the following decade, 74.3 billion euros; and in the last five years, as much as 88.6 billion euros. How is this possible?
The authors of the report *Europe Under Water: The Macroeconomic Cost of Floods and the Economic Case for Adaptation* explain that the main cause of rising losses is the concentration of economic activity in areas at high risk of flooding.
According to the World Meteorological Organization, Europe is warming faster than any other continent, and climate change brings with it an increased likelihood of heavy rainfall and flooding. If the average temperature rises by 3°C from pre-industrial levels by the end of this century, losses caused by river flooding in the EU and the United Kingdom could increase up to sixfold.
Germany has by far suffered the highest cumulative losses over the past quarter-century. These amounted to approximately $78 billion. Next on this list are Italy, with $42 billion, and Spain, with $25 billion in losses. This ranking is determined not only by the frequency of flooding but also by the concentration of valuable economic assets in areas at risk of flooding.
Good to know: More than 18 percent of the residents of Austria, Hungary, the Netherlands, Liechtenstein, and Slovakia live in floodplains.
A Hypothetical Great Flood in 2027
For the purposes of the report, experts from Allianz SE developed a simulation that assumes a major flood will occur in 2027. A separate scenario was developed for each European country based on records from 2015–2024. This type of approach is called flood modeling and is a fundamental tool for analyzing risks associated with climate-related disasters.
Analysts compared past floods with key macroeconomic indicators in individual countries and reached the following conclusions:
- Floods cause significant damage to investments.
- Damaged infrastructure and post-flood logistical disruptions drive up inflation.
- The indirect effects of floods include a decline in household consumption and deficits in public finances.
Based on a model predicting a major flood in Europe in 2027, it is estimated that investment in the Netherlands, Croatia, France, and Greece will decline by more than 14 percent over the next three years. The decline in household income could range from 3.9 percent in Slovakia to as much as 5.4 percent in Croatia, while GDP in the United Kingdom, Spain, Croatia, and Greece could fall by 0.8–1 percent.
Price increases caused by the floods in various countries could reach as high as 0.8–1 percent, while budget deficits are likely to increase by 1.6–2.4 percent.
Key finding: A flood is a local physical phenomenon, but its macroeconomic effects extend far beyond the flooded area.
Forecasts for Poland
The report also describes a scenario for Poland. According to experts at Allianz SE, if a major flood were to occur in our country in 2027, the value of cumulative investments from 2027 to 2030 would decrease by 12.9 percent, or approximately 14.8 billion euros. This would be a massive blow to the domestic economy.
The analysis shows that prices could rise by 0.8 percent, while GDP would fall by 0.5 percent—or nearly 16 billion euros. That is nearly 27 times more than the direct costs of the flood modeled by experts. The estimated increase in the public finance deficit is among the highest in Europe and could reach as much as 2.1 percent.
Adapting Pays Off!
What can be done today to avoid the worst-case scenario? The report suggests taking targeted adaptation measures that pay for themselves many times over— investing 1 euro can save up to 4 euros that would otherwise be needed to repair the resulting damage. Key areas for investment include:
- natural retention;
- construction of flood-resistant infrastructure;
- land-use planning that takes flood risk into account.
These measures should be combined into packages depending on the type of hazard: in the case of river floods—retention at the watershed level and appropriate land-use planning; and in the case of stormwater floods—local drainage systems and urban blue-green infrastructure.
The authors acknowledge that investments to prepare for floods are very costly and account for as much as 65 percent of public spending on climate change adaptation. For this reason, implementing them often meets with significant political resistance.
This situation is illustrated by the example of Germany, where the 2021 floods caused losses amounting to 38 billion euros. The National Flood Protection Program, launched more than a decade earlier, still has not been implemented on a large scale. Of the planned 6–7 billion euros, only 0.5 billion euros have been spent so far. The main obstacles mentioned in the report include the fragmentation of responsibilities among institutions and lengthy administrative procedures resulting from the need to obtain the necessary permits.
The Need for a Broad Perspective
The authors of the report confirm that there has been a shift in the approach to flood risk management in recent years: the number of regional risk maps is increasing, and artificial intelligence is helping to improve the planning of adaptation measures. Early warning systems are also becoming increasingly sophisticated, but overall progress remains insufficient in the face of the potential threat.
Flood embankments, protective walls, and retention basins can mitigate the effects of moderate floods, but they have their limitations, and during extreme events, they may be damaged, resulting in even greater damage.
Infrastructure-based protection is most justified in areas where there is already a high concentration of people and property, and where relocating developments or individually securing buildings is impossible or economically unfeasible. However, it should not be used as an argument for allowing new development in flood-prone areas.
The report also emphasizes the importance of adapting individual buildings to flood risks, including raising the level of installations, waterproofing, using water-resistant materials, and designing interiors in a way that facilitates cleaning and rapid drying. This is one of the most cost-effective ways to reduce flood risk.
In writing the article, I used:
Europe Under Water: The Macroeconomic Cost of Flooding and the Economic Case for Adaptation, Allianz Group Economic Research, July 9, 2026
