The floods that claimed 227 lives in Spain last month could reduce the country's economic growth by 0.2 percentage points in the final quarter of 2024, the central bank announced on Wednesday.

Spain's economy has outpaced the eurozone average in growth this year, rebounding strongly from the Covid-19 pandemic and offering crucial support to the minority left-wing government.

However, the disaster on 29th October caused widespread destruction, wiping out roads and railways, flooding fields, and devastating homes and businesses in the EU's fourth-largest economy. 

The total cost is projected to reach tens of billions of euros.

“The estimated impact would be close to -0.2 percentage points on the quarterly growth rate in the fourth quarter,” said Bank of Spain governor Jose Luis Escriva to reporters in Madrid.

He added that the estimate draws on comparisons with the aftermath of Hurricane Katrina, which struck the US Gulf Coast in 2005, claiming over 1,800 lives, AFP news agency reports.

Although the destruction caused by the floods did not match Katrina's severity, the “dynamics are very similar,” Escriva noted.

The disaster caused the greatest damage and loss of life in the eastern Valencia region, a key industrial and agricultural hub that also hosts one of Europe's busiest cargo ports.

According to Escriva, some of the worst-affected areas were residential towns within the industrial belt surrounding Valencia, Spain's third-largest city, severely disrupting economic activity in the region.

Spain's economy grew by 0.8% in the third quarter, driven by increased exports and domestic consumption, surpassing the Bank of Spain's predictions.

In September, the government raised its 2024 GDP growth forecast from 2.4% to 2.7% and has not yet adjusted these projections despite the impact of the floods.

Observers, including the International Monetary Fund, have also raised their outlook for Spain's economic growth. Credit ratings agency Fitch forecasts growth of approximately 3% in 2024, followed by over 2% annually in the subsequent two years.