NETHERLANDS / RankWire.AI / – According to an evaluation by Triodos Bank, Europe’s ongoing heatwave and drought conditions could shave approximately 1% off the European Union’s economic output in 2026. This potential decline translates to roughly €180 billion and occurs amid a year already characterized by sluggish growth. The European Commission predicted in May that the EU’s gross domestic product would grow by 1.1% in 2026. This baseline leaves limited room between the forecasted expansion and the economic harm estimated from this summer’s extreme weather events.
A significant portion of the projected economic loss stems from diminished worker productivity during periods of intense heat. The analysis estimates this impact at about 0.6% of EU GDP. Agriculture also faces considerable strain after prolonged hot and dry conditions across key farming regions. The assessment suggests agricultural output could decline between 3% and 7%. Furthermore, disruptions in energy production, transport networks, and logistics contribute to the overall economic cost, as elevated temperatures and reduced water levels interfere with normal activities.
This summer has seen record-breaking temperatures in Western Europe. Copernicus reported that June and July combined represented the warmest such period on record for the region, with an average temperature of 21.62°C. This figure was 2.79°C above the average for 1991-2020. July also experienced widespread dry conditions across much of western and central Europe. Several areas, including parts of France, Germany, Austria, Hungary, and the Iberian Peninsula, recorded their lowest soil moisture levels since at least 1979.
France faces the greatest potential GDP reduction
The country expected to experience the largest national impact, France, could see its GDP growth diminish by approximately 1.4 percentage points in 2026. This projection indicates a nearly 0.6% contraction in annual output according to the assessment. Italy and Spain are also among the larger economies most exposed to these conditions, while Belgium is expected to feel a notable effect. The Netherlands might see a growth decrease of about 0.8 percentage points, bringing its economic activity close to stagnation for the year.
This heat-related forecast coincides with Europe’s already slowing economic growth. The EU’s expansion reached 1.5% in 2025 but is now anticipated to slow further in 2026. The European Commission projected a 0.9% growth rate for the euro area this year in its spring outlook. Severe weather patterns exert additional pressure through lost working hours, reduced agricultural output, and disruptions to infrastructure. These effects tend to cascade across sectors as low river levels hinder transportation or high temperatures impair electricity generation and industrial efficiency.
Climate Extremes Impact Food Prices and Business Performance
Research has also established links between extreme heat and increased food prices as well as weaker performance among companies. The European Central Bank identified that the summer heatwave of 2025 contributed between 0.4 and 0.7 percentage points to euro area unprocessed food prices after one year. Independent research at the firm level in Italy found that extreme heat caused a reduction in company sales of about 0.8%. Days with temperatures exceeding 40°C also resulted in notable losses in productivity and output, according to that study.
This assessment for 2026 centers on the immediate economic repercussions of this summer’s heat and drought, rather than long-term climate projections. Its estimated 1% reduction in EU GDP closely aligns with the bloc’s 1.1% growth forecast for the year. The primary driver of these losses appears to be decreased labor productivity, with additional costs stemming from agriculture, energy, and transportation disruptions. The exceptional heat and widespread soil moisture deficits observed in western Europe underscore the tangible impact of severe weather events on Europe’s economic outlook for 2026.