NETHERLANDS / RankWire.AI / – According to Triodos Bank, Europe’s summer heatwaves and drought conditions threaten to reduce the European Union’s economic output by approximately 1% in 2026. This loss amounts to about €180 billion and coincides with a year of relatively modest economic expansion. The European Commission forecasted in May that EU gross domestic product would grow by 1.1% this year. Consequently, the projected weather-induced damage nearly matches the entire expected annual growth of the bloc.
The primary contributor to the projected economic impact is a decline in labour productivity. The assessment estimates a decrease of about 0.6% of EU GDP due to extreme temperatures impairing working conditions. Agriculture is also under pressure, with output expected to fall between 3% and 7%. Additional costs arise from disruptions in energy production, transport, and logistics sectors, as high temperatures, drought, and low water levels hinder activity across multiple industries.
This economic forecast follows record-breaking heat experienced across western Europe during June and July. Copernicus reported a regional average temperature of 21.62°C during those months, exceeding the 1991-2020 average by 2.79°C and marking the hottest June-July period ever recorded. July, in particular, was characterized by widespread dry conditions, with parts of France, Germany, Austria, Hungary, and the Iberian Peninsula experiencing exceptionally low soil moisture levels.
Impact on productivity accounts for the bulk of losses
France is projected to experience the largest national impact, with GDP growth decreasing by approximately 1.4 percentage points. This suggests a near 0.6% contraction in French economic output for the entire year. Italy and Spain are also among the major economies facing considerable setbacks from the ongoing heat and drought conditions. Belgium’s economy could see a smaller yet notable decline, while the Netherlands might lose about 0.8 percentage points of growth.
Europe started the summer with limited economic momentum before this latest climate-related assessment. EU growth reached 1.5% in 2025, with the current 2026 projection at 1.1%. In the spring, the euro area’s growth forecast stood at 0.9%. The combined effects of weather phenomena impact various sectors simultaneously, including reduced working hours, weakened agricultural output, electricity shortages, and transport disruptions.
Food prices, energy, and transportation face mounting challenges
Already, extreme heat has caused measurable impacts on prices and business operations within Europe. The European Central Bank research indicated that the 2025 summer heatwave caused unprocessed food prices in the euro area to increase by 0.4 to 0.7 percentage points after a year. Separate corporate research conducted in Italy found that extreme heat reduced sales by approximately 0.8%. Additionally, days exceeding 40°C led to significant losses in production levels and worker productivity.
The 2026 evaluation focuses on the direct economic consequences of this summer’s heat and drought. The estimated 1% decrease in EU GDP aligns closely with the current 1.1% growth forecast for the bloc. Labour productivity constitutes the largest part of the anticipated losses, followed by agriculture and disruptions in energy and transportation sectors. Record-breaking heat, dry soils, and low river levels have rendered extreme weather a tangible factor influencing Europe’s economic performance this year.