Valencia faces an economic challenge: the speed of aid will be key to recovery.

The economy of the province of Valencia faces a crucial moment following the impact of the Dana that occurred on October 29. According to a recent analysis by BBVA Research, the recovery of the Valencian Gross Domestic Product (GDP) could be faster than anticipated, provided that government aid arrives with the necessary speed. This report highlights the importance of support measures for affected businesses, which could allow the GDP to return to its previous trajectory in less than a year. The area affected by the flooding is responsible for generating 32% of the province's GDP and has a significant proportion of workers affiliated with Social Security. BBVA estimates that the damage caused by the Dana could have resulted in a 1.6-point drop in Valencia's GDP in the fourth quarter of 2024, while a 0.5% decline is projected for the Valencian Community. This situation has led to a downward revision of the expected growth for next year, setting it at 2.9%. During the presentation of the report, Rafael Doménech, Head of Economic Analysis at BBVA Research, and José Manuel Mieres, the entity's territorial director in eastern Spain, noted that the speed of economic reactivation will depend on the effectiveness and promptness of the aid directed to the affected sectors. It is estimated that if these conditions are met, growth in the Valencian Community could stabilize around 2.7% during 2025 and 2026. Recent data indicate that, despite the difficulties, Social Security affiliation in the province of Valencia has approached pre-Dana levels. However, the most affected areas continue to face challenges in their productive capacity. By the end of December, there were 10,626 workers in a Temporary Employment Regulation File (ERTE), a figure that contrasts with the average of 1,233 in the year prior to the disaster. Initial estimates by the Generalitat regarding the damage caused by the Dana exceed 10 billion euros. So far, aid totaling 16.6 billion euros has been approved by the State, of which 1.162 billion has been disbursed, and 1.324 billion by the Valencian Generalitat, of which 210 million have already been transferred. These figures represent 1.1% of the national GDP and 11.8% of the GDP of the Valencian Community. The capacity of the Valencian economy to recover from the impact of the Dana will largely depend on the effectiveness of the implementation of this aid. An optimal execution scenario could mobilize resources equivalent to 9.3% of the regional GDP, contributing to economic dynamism exceeding expectations. However, if execution is ineffective and the fiscal multiplier remains low, recovery could extend beyond one year. The BBVA report also indicates a relative worsening in economic activity data compared to the country as a whole, particularly regarding exports and tourism. The most affected areas continue to show signs of weakness, which could hinder recovery until conditions improve and the arrival of aid is effective. Thus, the Valencian economy finds itself at a crossroads. The decisions made in the coming weeks and months will be crucial in determining whether Valencia can return to its pre-Dana growth trajectory or, conversely, will be forced to deal with an extended period of stagnation. The conclusion is clear: the economic recovery of the province of Valencia is not only possible but could be swift, provided that decisive and prompt action is taken in the distribution of aid. The community and its economists are closely watching the future, hoping that the lessons learned from this crisis translate into effective actions to prevent similar situations from affecting its economic development again.