Spain | Comunitat Valenciana Economic Outlook. First Half 2025

Summary

The reactivation of the economy after the dana and the measures approved justify that in 2025 and 2026 growth could reach 2.7% if the aid arrives quickly and reaches the announced amount. Domestic demand will be supported by the fall in inflation and interest rates and by the increase in wages and employment.

Key points

• Key points:
• There is still no assessment of the damage caused by the dana on the capital stock of the province of Valencia. It is estimated that some 76,000 homes, 137,000 vehicles, 62,000 companies and 14,000 businesses have been affected, in 86 municipalities, representing 32% of the GDP and 36% of the regional affiliation.
• It is estimated that the GDP of the province of Valencia could have fallen ≈1.6 pp in 4Q24, and that of the Comunitat Valenciana, -0.5% t/t (vs. the counterfactual of +0.8%), which would lead to an advance of 2.9% in 2024.
• Some indicators show that activity is already recovering. In-person spending in Valencia has already closed the gap with Spain. In December, the affiliation in the province reached the levels expected before the dana and sales of new passenger cars have increased more than those of the rest of Spain since the third week after the dana.
• The aid approved amounts to 16,600 million from the State (1,162 million paid) and 1,324 million from the GVA (210 million paid), 1.1% of Spain's GDP (11.8% of the Community's GDP).
• Among the factors that could slow the pace of recovery: slow and inefficient implementation of aid; the progressive depletion of tourism's growth capacity; a possible increase in tariffs on exports to the U.S.; a shortage of affordable housing; slowing immigration; and uncertainty about economic policy.

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