Plausible economic impacts of the state of calamity

This note aims to frame and organize the available information regarding the extreme weather phenomena that have affected several regions of the country in recent weeks.

 

To this end, it provides a brief characterization of the affected territories and a preliminary assessment of the main channels likely to determine the economic impact of the calamity. This exercise aims to systematize the vast amount of information that has been disclosed, seeking to contribute to its understanding and contextualization. This is a work in progress, given the nature and scale of the events, and thus cannot be considered exhaustive or complete. It relies on information published and disclosed by official sources and national media.

 

Sequence of Atlantic storms. A so-called “storm train” has been occurring since January 22, 2026, caused by severe consecutive weather depressions. The sequence included the following storms:

 

• Ingrid (January 21-22)

• Joseph (January 25-26)

• Kristin (January 27-28)

• Leonardo (February 3)

• Marta (February 7)

• Nils (February 10)

 

Brief overview of the affected territories

 

Municipalities

• 68 municipalities in a state of calamity (initially declared on January 29, currently extended until February 15), representing 24% of the total municipalities in mainland Portugal.

• The affected area covers, at the NUTS III level, the Region of Leiria, Beira Baixa and Médio Tejo completely and, for the most part, the Region of Aveiro (9/11 municipalities), the Region of Coimbra (15/19) and Oeste (9/12) and, to a lesser extent, Lezíria do Tejo (3/11), Beiras e Serra da Estrela (2/15) and Alentejo Litoral (1/5).

 

 

Gross Domestic Product (GDP), NUTS III, current prices (2024)

• Region of Leiria = 2.6% of GDP 

• Region of Leiria, Beira Baixa and Médio Tejo = 7.0% of GDP

• Region of Aveiro, Region of Coimbra and Oeste = 9.9% of GDP

 

Population (2023)

• In the affected municipalities live 1.8 million people (17.2% of the resident population in Portugal).

 

Exports (2024)

• Of the 50 municipalities with the highest volume of goods exports nationwide, 13 are in a state of calamity.

• Direct exports of goods from these municipalities represent 15.5% of the national total.

• Main ones: Ovar (1.4%), Aveiro (1.3%), Leiria (1.1%), Marinha Grande (1.1%) and Estarreja (1.0%).

 

Employment, NUTS III, National Accounts (2024)

• Region of Leiria = 2.8% of employment (146 thousand workers)

• Region of Leiria, Beira Baixa and Médio Tejo = 5.2% of employment (273 thousand workers)

• Region of Aveiro, Region of Coimbra and Oeste = 10.3% of employment (544 thousand workers)

 

Gross Value Added (GVA), NUTS III, current prices (2023)

• Although the affected regions represent approximately 14.9% of the national GVA, they represent 23.5% of the GVA from Industry and 23.1% of the GVA from Agriculture.

• For example, the Aveiro Region represents 8.0% of the GVA from Industry, while the Oeste region represents 8.4% of the GVA from Agriculture.

 

Source: INE. Note: The GVA of Public Administrations (PA) corresponds to the A10 nomenclature “Public administration and defense; compulsory social security; education, human health and social work activities”. For the estimate for the municipalities in a state of calamity, the NUTS III are considered in which the municipalities in a state of calamity cover all or most of the territory.

 

What will determine the economic impact

 

The impact on GDP is complex. A distinction must be made between the impact on the flow of activity (production, consumption) and on the stock of wealth (financial and non-financial, for example, housing), including on productive capital. However, the interdependence between the two must be taken into account. Furthermore, the impact will differ across the territory declared to be in a state of calamity, given the different nature of the phenomena in question, their intensity, and spatial concentration.

 

Main immediate impacts: 

 

• damage to public infrastructure and losses generated by failures in electricity, gas, or water supply, limited access, and unstable communications;

 

• loss of wealth suffered by companies (e.g., equipment, factories, stock, commercial and heavy vehicles, land, and other biological assets) and households (e.g., housing, vehicles);

 

• decline in economic activity (e.g., production, consumption) due to numerous factors, notably the difficulties in the mobility of people, movement and circulation of goods, and services such as tourism and hospitality;

 

• relevant international orders at risk, with negative repercussions, including reputational ones, on national export performance;

 

• second-order effects in unaffected regions, both upstream and downstream, due to the interconnection of production in the affected municipalities with the rest of the national productive fabric (e.g., supplies not being made affecting the production of customers located in other regions; purchases not being made harming the activity of their suppliers from other regions);

 

• the activation of support measures for affected households and companies, which include direct public aid, compensation from insurers, and credit moratoriums;

 

• impact on tourism activity during the Carnival period: between January and March 2025, overnight stays in hotels in these municipalities accounted for 16.6% of the year's total in these territories or 1.5% of the year's total for Portugal. Catastrophes can have a deterrent effect on tourism demand by increasing the perception of risk. The tourism industry suffers from the suspension of its operations and the cancellation of major events.

 

Main short to medium-term impacts: 

 

• increase in spending, by the State, companies, and households, for the reconstruction of infrastructure and replacement of damaged goods, benefiting activities such as construction, trade, or transport;

 

• Damage to transport infrastructure can reinforce social exclusion and worsen existing inequalities, by isolating communities;

 

	The recovery of road infrastructure will be phased and prolonged over time, according to information provided by the Minister of Infrastructure;
	There are other conditioning factors that will limit the pace of recovery, namely constraints on increasing installed capacity in the construction sector, for both machinery and equipment, as well as materials and labor. It should be taken into account that 25% of companies were already reporting at the end of 2025 difficulties in hiring workers;
	In the case of repairing other industrial equipment, access to specialized labor may not be immediate due to the simultaneous increase in demand from several operators. This effect could be reflected in the increase in prices.

 

• insolvency of companies whose operations become unviable, due to the inability to resume production and/or recover their equipment and orders;

 

• relocation of production units located in the affected areas and the non-viability of investment projects due to the risk of a recurrence of similar weather phenomena, especially if there is no investment in infrastructure that makes the territories more resilient;

 

• irrecoverable drop in production in the agricultural sector in the short-term, with an impact on food prices in subsequent periods;

 

• due to their scale, the resources – physical and monetary – dedicated to recovery will tend to be substitutive rather than additional to other investment projects already underway;

 

• In addition to this more general territorial and economic impact, there is also the impact on the physical and mental health of families, including on the prevalence of trauma, as well as on their economic security. Disasters affect human capital in the long term through their impact on health, employment, and migration decisions. It should be noted that community cohesion often acts as a resilience mechanism, as high levels of social capital and mutual trust enhance recovery.

 

The experience of the Valencia floods (October 29, 2024)

 

An analysis by Caixabank offers a picture of the destruction experienced in Valencia in the 2024 floods^[1]. It identifies an uneven recovery depending on the municipality, company size, and socioeconomic profile. It identifies an uneven recovery depending on the municipality, company size, and socioeconomic profile.

 

• in the case of companies in the most affected area, the impact was more severe, with turnover falling 83% in the week following the event and remaining lower than previously recorded for more than six months;

 

• Company size proved decisive: small businesses suffered sharper drops in turnover and failed to recover fully, unlike large companies, which demonstrated a greater capacity for recovery;

 

• Household consumption in the most affected area returned to normal levels one month after the tragedy;

 

Among residents, individuals with lower incomes suffered the greatest impact: consumption decreased by up to 82%, compared to a 40% drop for higher-income groups; at the same time, the recovery was faster for higher-income households. 

 

The impact can be long-lasting in the affected territories: according to a study by two economists from the Banco de España (2025), “The flash floods in Spain, one year on: the economic impact of a natural disaster”, it is concluded that while, on the one hand, reconstruction efforts can help GDP growth and the replacement of damaged assets with more productive, modern, and efficient ones, the losses of stock of capital and wealth can have a persistent negative effect on the GDP of the affected regions, particularly if reconstruction is slow and incomplete.

 

The economic impact over time: GDP, capital stock, and wealth

 

Source: Banco de España (2025).

 

The medium-term economic impact varies depending on the type of disaster. Ehlers et al., in “Macroeconomic impact of weather disasters: a global and sectoral analysis.” (Bank of International Settlements Working Paper No. 1292, 2025), find that:

 

• this study published by the BIS identifies persistent GDP losses of 2% for droughts, 1% for landslides, and 0.4% for wildfires, in the subsequent 4 years;

 

• the positive impact in the case of floods and storms only emerges after one year from the event;

 

• the macroeconomic effects of a given weather disaster depend on the nature of the shock and the country's circumstances – in particular, the existing fiscal space and insurance coverage of affected companies and individuals;

 

• the sectoral effects are also unequal. For example, agriculture, forestry, and fishing experience a decline after droughts and storms, an effect that persists for three and two years, respectively.

 

GDP reaction after climate disasters, with controls for sovereign credit rating and property insurance premiums

 

Source: BIS (2025).

 

The importance of insurance in the context of natural disasters

 

 

 

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Date of last update: 12/02/2026