Alex Trelinski
THE Bank of Spain says that the DANA floods will cut the country’s economic growth and increase inflation.
The entity said on Wednesday that 0.2% will be trimmed off the country’s GDP in the fourth quarter of 2024 as a result of the disaster.
The Bank of Spain said in a statement: “Estimates are subject to significant uncertainty, but, based on previous weather-related events, the estimated impact on GDP is 0.2% between October and December, remaining negative one year later.”
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It also said the floods would increase inflation by 0.15%.
Before the floods, the government had expected the Spanish economy to grow 2.7% this year, by far outperforming its European peers.
Inflation rose by 1.8% in the year leading up to October.
The government has announced a €14.36 billion aid package to help households and businesses cope with the economic impact of the floods.
The Bank of Spain governor, Jose Luis Escriva, said it would be desirable for aid to be ‘temporary and specifically targeted’ to affected businesses to reduce long-term costs.
Damages to the commercial sector in towns hit by floods could amount to over €10 billion, with banks’ loan exposure to the affected area worth around €20.6 billion.
Escriva said on Wednesday the Spanish banking sector would be able to absorb the shock, including the smaller lenders.
In total, the central bank identified almost 27,000 companies with outstanding loans and half a million loan holders in flood-hit regions like Valencia.
