CaixaBank Research, the financial institution’s research service, estimates that the aid approved by the Government for those affected by the dana would have a “little material” impact on this year’s deficit and “the bulk will materialize in 2025.”
This is stated in an article included in its monthly report for the month of December consulted by Servimedia in which it makes this assessment but does not provide a calculation on the impact that the aid would have on next year’s deficit. It is worth remembering that the Government’s forecast is thatThe public deficit closes the year at 3% of GDP and in 2025 it will drop to 2.5%, continuing on the downward path until reaching 1.8% in 2027, as communicated to Brussels last October.
However, in the face of the Dana catastrophe, which has left more than 200 dead in the Valencian Community alone, and the different aid packages approved by the Government that reach 16.6 billion, The Scope Ratings agency has begun to do the math on the impact on the deficit and has raised its forecast by seven tenths for this year due to the catastrophe and another seven tenths for 2025, leaving the deficit at 3% of GDP one year. after what the Government foresees.
From CaixaBank, they point out in the report that the impact will be “little material” this year and “the bulk will materialize in 2025”, although it does not provide a calculation in this regard. The Bank of Spain already warned in its latest update of projections that the deficit “could be above 3% of GDP, partly as a consequence of the extraordinary expenses derived from the economic policy measures adopted in response to the recent floods” .
In fact, the organization raised its estimate by one tenth, to 3.4% of GDP by 2024, and warned that “the fiscal response related to the dana could mean a specific increase in the deficit close to 0.5% of GDP and that would be distributed between this year and next.”
What CaixaBank does provide data on is the behavior of GDP. Specifically, he calculates that the “devastation” of the dana could subtract between one and two tenths from the Spanish GDP in the fourth quarter of the year, but “we do not believe that it will put at risk our forecast of 2.8% for Spain as a whole in 2024 “.
The Government has not revised its forecast either, as it estimates an impact of one tenth, which for the year as a whole would barely be noticeable. while the Bank of Spain estimates between one and two tenths less growthbut has raised its GDP projection due to the carryover effect of the upward revisions carried out by the National Institute of Statistics (INE).
Looking ahead to 2025, CaixaBank highlights that rehabilitation and reconstruction work and purchases of durable goods (furniture, appliances, vehicles, etc.) should represent a positive net contribution of between one and three tenths.
CaixaBank Research explains that the sectors that have been most affected by the floods are agriculture, which represents 2.2% of the gross added value of the province of Valencia; the manufacturing industry, with a weight of 15.3% in the productive structure of the region, and commerce, transport and hospitality and leisure, which represent 24%. The sector with the highest degree of direct impact is the agri-food sector, since around half of the useful agricultural area is affected and production losses reach 100% in some cases.
The impact on tourist infrastructure and the hotel industry has been “limited, which should allow the tourism sector to reactivate in the coming weeks,” according to CaixaBank, which invites reflection on “the need to invest in mitigating the consequences of climate change and adapting to it in especially vulnerable regions.”
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