Spain Floods Expected to Impact GDP Growth

Catastrophic floods in eastern Spain on October 29 have resulted in over 200 fatalities and are projected to reduce the country's GDP growth by 0.2 percentage points in the fourth quarter of 2024, according to the Bank of Spain. The floods primarily affected the Valencia region, which is responsible for around 2% of Spain's economic activity, causing significant damage to infrastructure and businesses. The Spanish government has responded with a €14.36 billion aid package to support affected households and industries. Despite the disaster, the government's previous economic growth forecast of 2.7% for 2024 remains unchanged, although CaixaBank now estimates growth could be between 2.9% and 3% without the flooding's impact. The situation has raised concerns about inflation, with expectations of a slight increase in consumer prices due to the floods. The central bank highlighted the need for targeted and temporary aid to mitigate long-term economic impacts.