Serbia braced for fresh river surge

By bne IntelliNews May 19, 2014

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Devastated by the floods that have hit the Balkans, Serbia says it is bracing for peak waters on May 19. The disaster threatens to overturn Belgrade's efforts to reform a struggling economy, however, some suggest a silver lining.

The rain has finally stopped in Belgrade - three months' worth has fallen in a matter of days - but emergency workers in Serbia are preparing for a "flood wave" on one of the country's main rivers, media report. "These are the kind of waters not seen in 1,000 years," Prime Minister Aleksandar Vucic told a televised cabinet session. The worst floods in the Balkans for decades have left 37 dead and forced tens of thousands to flee.

While the rain clouds have receded, it is feared that the meeting of high waters flowing from Croatia and Bosnia with those in the Danube could cause a devastating spike for the River Sava. Water levels on the river are expected to peak on May 19. The risk of new flooding threatens the country's biggest power plants, which supply much of the country with power.  

Hundreds of soldiers and residents scrambled to put up sandbag barriers around the perimeter of the Kostolac power plant east of Belgrade. Workers at the plant joined the effort, digging up a road in a bid to divert waters that threatened to flood nearby coal mines, reports Reuters

The Kostolac plant supplies 20% of Serbia's electricity. Flooding has already cut Serbian power generation by 40%, forcing the cash-strapped country to boost imports. A fire and flooding of surface mines on May 16 at the Kolubara power plant southwest of Belgrade caused damage of at least €100m.

Vucic warned on May 16 that the country's biggest generation plant - Nikola Tesla - could be shut down if the Sava rises significantly. However, Serbian media reports that the efforts to protect the facility have been successful so far.

Initial estimates of the damage is being put at above €1bn as the floods devastate the key agriculture sector. That's bad news for an economy already struggling to keep its head above water.

The initial impression is that the catastrophe will severely impact the economy. It risks weaker growth by disrupting the vital agriculture sector and halting output across the sectors, while also denting domestic demand and impacting state finances that are already deep in the red.

However, Tim Ash at Standard Bank suggests it could in actual fact potentially offer momentum. "This could serve in a similar manner to the earthquake in Turkey in the late 90s, by rallying international support [for] Serbia. This increases the chances of an early agreement being reached with the [International Monetary Fund] and of early/more disbursements from the UAE, EU and even Russia. The IMF deal, in particular, will be a key anchor for broader structural reform in the economy."

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