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The DANA storm may have destroyed at least 20% of the 85.9 billion euros of total assets, both private and public, located in the area affected by the floods

The report published by the Ivie highlights that investment in hydraulic infrastructures in the province of Valencia was 75% less after the Great Recession

The floods on 29 October 2024 in Valencia destroyed both private and public assets, including housing, commercial, industrial and agricultural buildings and facilities, machinery, equipment and infrastructures in general. This represents a loss of wealth for the province of Valencia much greater than what the initial fall in GDP.

A total of 35% of the province’s assets, worth 85.9 billion euros, are located in the 89 municipalities affected by the floods (excluding Valencia). Therefore, every percentage point of destruction in assets in the affected areas is equivalent to 859 million euros in losses. According to the Chamber of Valencia and AVA-Asaja, the damage to company assets alone would already exceed 13,000 million euros. If we include in this figure the reduced percentage of damage to the housing stock, specifically those located on the ground floors of buildings, and the significant destruction of infrastructure (estimated at 2.9 billion euros by the Spanish Ministry of Transport and the Valencian Regional Government), at least 20% of the total assets may have been lost. In this scenario, the amount of losses would easily exceed 17,000 million euros, which is much higher than the reduction in GDP estimates for 2024.

In the recently released report entitled Alcance económico de la dana del 29 de octubre en la provincia de Valencia, carried out within the framework of IvieLAB (Laboratory for the Analysis and Evaluation of Public Policy), the Ivie estimates the possible dimension of the disaster in the form of loss of wealth (assets) in the area.  The document warns that, although the exact amount is yet unknown, the impact of the floods will be much higher than that reflected in the initial drop in GDP, since its estimation does not take into account the destruction of assets caused by the sudden and extraordinary depreciation of a large part of the capital stock.

In addition to the initial loss of assets, Ivie’s report highlights that the DANA (acronym for high-altitude isolated depression), will have long-term consequences beyond 2024, including the need for restoration and recovery as well as restrictions on the normal development of activities in 2025. The size of these impacts, both negative and positive, will depend on the amount and focus of the aid provided to the affected area, and the resilience of the Valencian economy and society.

The estimates provided in the report refer to the 89 municipalities affected by the floods (excluding the city of Valencia, since only a few of the southern districts of the city were affected). The population in those municipalities has doubled between 1960 and 2024 to over one million inhabitants. The study also offers data on the 20 municipalities in l’Horta Sud, with a special focus on the 15 municipalities that have been severely affected, the so-called “ground zero”. These municipalities of l’Horta Sud have had an even stronger demographic growth, with a 200% increase in the same period. This has resulted in a population of 1,592 inhabitants per km2, six times more than the average for the province of Valencia.

Alongside the demographic concentration, the areas affected by the floods are heavily occupied by residential and commercial assets of all kinds, an important part of which have been affected. With an estimated value of 56,295 million euros,  housing accounts for 65% of the assets in the area, while the remaining 35% is made up of public infrastructures and other private constructions (23,605 million euros). In this regard, the report highlights that the increase in population has had an impact on land cover (which until the 1960s was mainly agricultural), increasing the amount of land used for infrastructure and residential and non-residential buildings. One of the most notable consequences of the expansion of artificial surfaces is the drastic decrease in water permeability.

The report highlights the contrast between the intense occupation of the area and its floodable nature, on the one hand, and the limited investment effort in hydraulic infrastructures during the last fifteen years in the province of Valencia, on the other. Most of the hydraulic investments are made by the Public Administrations and the Hydrographic Confederations, but in both cases there has been a strong downward adjustment as of 2009, as a result of the cuts in public investments in Spain at the outbreak of the financial crisis to control public deficit. From annual investment figures in hydraulic infrastructures in the province of around 200 million euros, the figure drops to less than 50 million per year as of 2011, which means a 75% drop that continues until the most recent years. As a consequence of this low investment effort in hydraulic infrastructures, new projects have been postponed and the depreciation of previously accumulated capital has not even been covered. The effects of this insufficient investment policy are more serious due to the characteristics of the territory, which is particularly vulnerable to flooding and among the most threatened by the growing risks of extreme weather events arising from climate change.

Sectors hardest hit by the DANA

In addition to the destruction of assets (wealth) experienced on 29 October 2024, the dana has other serious economic consequences because it prevents the normal functioning of productive activities. As a whole, the 89 municipalities concentrate 40% of the population, 35.6% of companies, 30.7% of employment and 29.7% of the GDP of the province of Valencia. The area represents one of the largest concentrations of industrial, commercial and logistic employment in the Valencian Community, so that any interruptions to activity or changes to activity flows during the months in which the effects continue will have a strong impact on employment and GDP.

In the case of employment, according to the latest available data on the amount ERTES (temporary suspension of the employment contract) requested, between 30 October and 8 January 2025, 30,584 workers were affected in the municipalities as a whole (29,046 if València is excluded), of which 14,539 are from l’Horta Sud area and 13,786 from ground zero. The percentage of workers affected by this procedure stands at 7% in 89 municipalities, 8.4% in l’Horta Sud and 7.6% in ground zone. However, behind these percentages are important differences by sector. In ground zero, seven sectors were affected the most, since their percentages of workers under ERTE exceeded 12% of their affiliation: manufacturing (18.7%), commerce and repair (17.7%), hotels and restaurants (34.7%), real estate activities (19.2%), education (15.5%), health and social services (12.9%), and artistic, recreational and entertainment activities (30.2%). In two of them, the percentage is over 30%, reaching a maximum of 34.7% in hotels and restaurants.

How georeferencing can help with damage diagnosis

In assessing the initial impact on GDP in 2024, the estimation of losses in the affected municipalities is hindered by the lack of consistent data at municipal level. Some entities have predicted a reduction in Spain’s annual GDP growth that could reach a maximum of one tenth, or losses of somewhat less than 1.6 billion euros, which are obviously concentrated in the affected Valencian municipalities. However, others quantify the impact in two tenths of lower annual GDP growth of the autonomous region (which would fall short of 300 million euros). These large differences show the degree of uncertainty that still exists in the calculations.

In addition to having access to direct information that allows for a more precise assessment of the decrease in activity (from tax sources, electricity and gas companies, or information from financial institutions), georeferenced data is also needed.

The report makes an approximation of the delimitation of the area based on satellite images released by the Copernicus Emergency Management Service. According to the cartography used, the resident population in the flooded area would amount to 306,163 people, equivalent to 28.9% of the total population of the affected municipalities and 11.8% of the inhabitants of the province of Valencia. The number of people living in flooded areas in the municipalities of l’Horta Sud is 214,531, making up 45.5% of the total population of these municipalities. While, in ground zero the population of the flooded areas represents 77.7% of the total population in these municipalities (201,661 people).

In order to evaluate the impact in terms of surface area, the detailed analysis of the geographic information is also necessary, since the intensity of the floods in the municipalities is diverse. The flooded area makes up 5.2% of the total surface area of the province of Valencia and represents 11.6% of the surface area of the 90 municipalities classified by the Valencian regional government (Generalitat Valenciana) as affected (only the southern districts of Valencia are taken into consideration). This percentage increases to 31.1% of the territory of l’Horta Sud and 21% of the 15 most severely affected municipalities.

Recommendations for reconstruction

• An estimation of the amount of assets lost should be the primary benchmark to calculate the aid needed to reconstruct.
• The aid must have the power, agility and duration to respond to the magnitude of the disaster to recover the lost resources and income.
• A system of indicators is needed to monitor the recovery and warn of the risk of stagnation in the area most  damaged.
• It is essential to make full use of new analysis tools (such as geo-referencing) to carry out a more thorough, in-depth and rigorous diagnosis of the impact of the dana.
• In order to increase investor confidence, a plan of action is needed to prevent and lessen the effects of future extreme weather disasters.
• The distribution of public spending priorities has to be reevaluated in the future so more priority is given to investment than present spending.
• More investment in hydraulic infrastructures is needed, as well as an adequate design and location of all types of infrastructures to reduce exposure to the risks posed by extreme phenomena.
• It is necessary to take advantage of the recovery strategy to modernize and improve Valencia’s productive fabric (especially in light of the structural and generalized issue of low productivity), which is more feasible in situations where the destruction of assets has been more intense.
• Tangible investments in prevention must be accompanied by intangible assets, which allow for a strong organized emergency response, adequate provision of specialized and trained personnel, and likewise, preparing citizens to react adequately to disasters.