Floods in Spain that killed 227 people last month could hurt economic growth by 0.2 percentage points in the final quarter of 2024, the central bank said on Wednesday.
Spain’s economy has grown faster than the eurozone average this year after recovering from the Covid-19 crisis, providing vital political oxygen to the oft-beleaguered left-wing minority government.
But the Oct. 29 disaster washed away roads and rail lines, flooded fields and destroyed homes and businesses in the European Union’s fourth-largest economy.
The final bill is expected to amount to tens of billions of euros.
“The estimated impact would be almost -0.2 percentage points on quarterly growth in the fourth quarter,” Bank of Spain Governor Jose Luis Escriva told reporters in Madrid.
He added that the estimate is based on what happened after Hurricane Katrina devastated the U.S. Gulf Coast in 2005, killing more than 1,800 people.
Although the devastation caused by the floods did not reach the “level” seen in the aftermath of Katrina, “the dynamics are very similar,” Escriva said.
The disaster caused the most damage and deaths in the eastern region of Valencia, one of Spain’s industrial and agricultural powerhouses and home to one of Europe’s busiest cargo ports.
Some of the worst hit areas were residential towns in the industrial belt around Valencia, Spain’s third-largest city, which disrupted economic activity there, Escriva said.
The Spanish economy grew by 0.8 percent in the third quarter thanks to rising exports and domestic consumption, outperforming Bank of Spain forecasts.
The government in September revised its forecast for GDP growth in 2024 from 2.4 percent to 2.7 percent. So far, the country has not changed its estimates in the aftermath of the floods.
Observers including the International Monetary Fund have also upgraded the country’s growth prospects, with credit rating agency Fitch predicting around three percent in 2024 and more than two percent in the following two years.
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