The Governor of the Bank of Spain, José Luis Escriva, presented the central bank’s estimate of the impact of DANA at the macroeconomic level. The former minister limits the decline in activity or a “minor” increase in long-term inflation to 0.2 points. “There will be an intense resumption of activity in the affected area. Not immediate, it will take a few quarters, but the picture as a whole gives the impression that it will be a significant resumption,” he said. -he explained. The positive surprises in terms of growth, as well as the investments deployed to reconquer the territory, will compensate for the destruction of productive capital.
The governor relies on economic models that analyzed Hurricane Katrina or the historical impact of natural disasters. Thus, the impact will be “very difficult to distinguish and very irrelevant”. “Once the flow of water has passed, The feeling we have is that the effect of destroying productive capacities could have been less intense.. But this is still very provisional,” says Escriva.
The physical capital destroyed by the flood, everything relating to machines, computers, etc., will recover over the coming quarters thanks to the investments that will arrive. For their part, homes, which are the most difficult to recover, would not be as affected.
The Bank of Spain considers the good distribution of aid in the affected area to be vital. “The more effective the measures areand the package is very substantial, “the less impact this will have on economic activity and on the agents affected by DANA.”. He considers that the pandemic or the La Palma volcano have refined government policies and, as governor, he is in favor of short-term spending to avoid the destruction of the economic fabric which leads to higher costs in the long term.
The Bank of Spain is currently carrying out its economic forecast revision exercise which it updates quarterly and considers that the positive surprises arising from the INE revisions will offset the impact of the DANA at the macroeconomic level in the coming quarters.
If we take the 78 municipalities concerned, The area represents 2% of the economy, with a greater weight of the industrial sector in this area -around 3%-. “We are talking about 2% of the population, 2% of employment and 3% when we talk about the industrial sector,” explained the governor.
Escriva said another characteristic of the region is that they are dormitory towns and many people live there but work elsewhere. Thus, the agency estimates that almost half a million people have mortgages in the region, out of a population of one million, and 150,000 have actual mortgages.
“This is why this other aspect linked to residential housing is important and, fortunately, the impact seems to have been much more limited and more focused on industrial activity,” he stressed.
Likewise, the governor explained that the total credit exposure in the affected area is 20.584 million euros, which represents 1.8% of credit, with 561,210 customers affected.
