It will subtract between one and two tenths from Spanish GDP in the fourth quarter of 2024.

The floods caused by DANA on October 29 in Valencia will have a negative impact between one and two tenths of Spanish GDP of the fourth quarter of this year.

This is clear from a report on the economic impact of flooding in the province of Valencia carried out by Search CaixaBank.

The entity assures, however, that the forecasts of 2.8% for the whole of Spain in 2024 will not be jeopardized.

Furthermore, it establishes that in 2025, rehabilitation and reconstruction works and purchases of durable goods “are expected to make a net positive contribution” to the GDP growth of the Spanish economy as a whole.

The study recalls that the province of Valencia contributes 5% of Spain’s GDP and 53% of the GDP of the Valencian Community.

Furthermore, in terms of population, the country has approximately 2.66 million people, of which one million live in the 75 communes affected by the floods.

Among these, 15 municipalities were very seriously affected, with a population of 265,000 inhabitantswhich represents 10% of the total of the province and 0.5% of the Spanish population.

According to this analysis, the sector most affected by flooding is the agricultural sector, which represents 2.2% of the gross value added (GVA) of the province of Valencia.

Next comes the manufacturing industry, with a weight of 15.3% in the region’s productive structure, and commerce, transport, hotels and leisure, which represent 24% of the GVA.

Sectors concerned

Regarding the agri-food sectorthe report indicates that about half of the useful agricultural area is affected and that production losses, which were also in the middle of the harvest season, reach 100% in some cases.

The most affected products were persimmon, citrus, rice and vines. A provisional assessment from the Ministry of Agriculture, Fisheries and Food (MAPA) estimates that 49,000 producers and 70,000 hectares were affected by the storm.

Regarding industry, the area concentrates 2.7% of industrial companies and 3.6% of employment in this sector in the whole of Spain, compared to 2% of total companies and 1.9 % of total employment.

The floods inundated industrial areas and logistics centers, many linked to maritime export activities.

Daily data from port activity show a sharp drop in exports from the port of Valencia (-60.5% over one year on a weekly average until November 17).

For their part, imports recovered very quickly (+44.1% over the same period compared to a drop of 17.0% the first week after DANA).

Shops

Retail has also been hit hard. According to the Valencia Chamber of Commerce, it is estimated that more than 5,000 businesses could have suffered direct damageof which 67.6% suffered serious damage.

In addition, in the affected areas there are also some 21,000 service establishments (hotels, hairdressers, academies, clinics, workshops, etc.), of which around 42% may have suffered serious damage.

CaixaBank’s internal card payment data in the affected area makes it possible to assess the scale and intensity of the initial impact on commerce, and to monitor in real time the degree of recovery in the areas depending on the degree of impact.

So, the first week after DANA, More than 90% of businesses at Ground Zero were unable to open their doors resulting in the collapse of its turnover (a drop of 83% over one year).

In the rest of the affected municipalities, but outside Ground Zero, the impact was significant, but of lesser intensity. The report indicates that 30% of businesses did not record any activity in the first week, but they quickly moved in a manner very similar to the rest of the unaffected municipalities.

Its turnover has barely decreased, 2% per year at the timeperhaps due to a substitution effect of businesses in the affected area.

On the other hand, “the recovery of trade from ground zero is very slow.” According to this study, during the week of November 13 to 19, in-person spending with Spanish cards was still 67% lower than in the same week last year.

By category of expenditure, retail trade (textiles, furniture, household appliances, etc.) is barely recovering, with a drop of 89% over one year and 77% of businesses inactive.

He leisure and hospitality sector shows a slight improvement compared to the first week after DANA, but the impact remains very significant (decrease in invoicing of 59% over one year and 67% of inactive companies).

On the other hand, essential businesses (food and pharmacy) show a better trajectory: 51% less turnover over one year and 52% of inactive businesses the week of November 13 to 19, compared to a drop of 71% in billing. and 90% of businesses inactive in the first week.

The complete destruction of numerous premises on the ground floor suggests that a percentage of these businesses, difficult to quantify, “will be doomed to permanent closure”, according to this report.

Tourism

For their part, spending with foreign cards makes it possible to assess the degree of impact on the tourism sector. In the first week after DANA, foreign spending fell to zero (-90% year-on-year) and the degree of recovery is very limited (-76% year-on-year in the week of November 13-19).

International spending in the rest of the affected municipalities saw a slighter decline in the first week (-25% year-on-year), but shows no sign of improvement (-25% the week of November 13 to 19).

These data, according to the study, contrast with the increase in spending by international tourists across Spain (18% over one year) and this can possibly be attributed to the impact of flooding on the infrastructure needed to transport tourists and the negative effect of the announcement of the disaster on potential visitors.

Regardless, the impact on tourism infrastructure and the hospitality industry has been limited, “suggesting that reactivation of the tourism sector could be relatively rapid once infrastructure has been repaired and transport connections damaged communication will have been restored.

Macroeconomic impact

The CaixaBank Research study estimates that the devastation of DANA could reduce between one and two tenths of Spanish GDP of the fourth quarter of 2024, “an estimate subject to a high degree of uncertainty”.

“A high degree of impact is expected in the primary sector, a moderate impact in industry and a more moderate impact in trade (substitution effect) during the last two months of the year,” the document states, which emphasizes that the initial cleanups and reconstruction will mitigate the impact on economic activity.

About the estimate for 2025“Empirical evidence on the impact of natural disasters on GDP generally shows that it is limited and transitory, although the negative impact still dominates a year later.”

In any case, the study points out, the estimates are subject to a high degree of uncertainty and will depend to a large extent on the scale of the investment effort for reconstruction and replacement of destroyed capital, as well as the support measures that are implemented. implemented.

In this sense, the The government approved measures worth 16.6 billion euros between aid, guarantees and investments (1.1% of GDP). The impact of this package on the public deficit in 2024 should be not very material, since most of it will materialize in 2025 and, in addition, 5 billion are guarantees managed by the ICO.

“We estimate that the deployment of this aid, as well as investments for reconstruction, can contribute to a positive impact on Spanish GDP in 2025 of between one and three tenths,” he adds.