NETHERLANDS / RankWire.AI / – According to Triodos Bank, the summer heatwave and drought conditions across Europe might reduce the EU’s gross domestic product by approximately 1% in 2026. This estimated decrease is roughly €180 billion and occurs during a period of already modest economic expansion. The European Commission forecasted in May that the EU’s GDP would grow by 1.1% this year. Consequently, the weather-related damage is nearly equal to the entire expected annual increase in economic output for the bloc.
Most of the projected economic impact stems from reduced labor productivity. The analysis estimates that productivity losses account for about 0.6% of EU GDP, as extreme temperatures adversely influence working conditions. Agriculture is also under pressure, with output expected to decline between 3% and 7%. Additional costs are driven by disruptions in energy, transport and logistics sectors, as high temperatures, drought, and low water levels hinder activity across multiple industries.
The economic forecast follows record-breaking heat experienced across western Europe during June and July. Copernicus reported an average regional temperature of 21.62°C during these months, which is 2.79°C above the 1991-2020 average, marking the hottest June-July period on record. July also brought widespread dry conditions, with parts of France, Germany, Austria, Hungary, and the Iberian Peninsula experiencing exceptionally low soil moisture levels.
Worker productivity accounts for the majority of potential losses
France is expected to see the largest national impact, with GDP growth reduced by about 1.4 percentage points. This reduction would place France’s economic output at roughly a 0.6% contraction for the full year. Italy and Spain are also among the major economies facing significant losses due to heat and drought. Belgium’s economy is affected but to a smaller extent, while the Netherlands could experience a growth decline of around 0.8 percentage points.
Europe started the summer with limited economic momentum before the latest heat-related analysis. EU growth reached 1.5% in 2025, and the current forecast for 2026 stands at 1.1%. The spring outlook predicted a 0.9% growth rate for the euro area. Weather-related disruptions can impact multiple sectors simultaneously through reduced working hours, lower agricultural output, energy shortages, and transport interruptions.
Food prices, energy, and transportation sectors face increased strain
The effects of extreme heat are already evident in Europe’s prices and business activities. European Central Bank research indicates that the 2025 summer heatwave increased euro area unprocessed food prices by 0.4 to 0.7 percentage points after a year. Separate studies at the firm level in Italy found that extreme heat decreased company sales by approximately 0.8%. Temperatures exceeding 40°C also caused significant losses in production and worker productivity.
The 2026 report quantifies the immediate economic impacts of this summer’s heat and drought. Its projected 1% reduction in EU GDP is close to the current 1.1% forecast for annual growth. The largest part of the losses is attributed to declining labor productivity, followed by reductions in agriculture and disruptions in energy and transportation sectors. The record heat, dry soils, and low river levels have made extreme weather a tangible influence on Europe’s economic performance this year.