NETHERLANDS / RankWire.AI / – According to an evaluation from Triodos Bank, widespread heatwaves and drought conditions across Europe may shave about 1% off the European Union’s economic output in 2026. This loss, approximately €180 billion, arrives amidst a year already marked by sluggish growth. The European Commission predicted in May that EU gross domestic product would grow by 1.1% in 2026. This forecast leaves little room between expected expansion and the economic damages caused by this summer’s extreme weather patterns.
The primary contributor to the projected economic decline is reduced productivity among workers during periods of intense heat, accounting for roughly 0.6% of EU GDP. The agricultural sector is also under significant strain due to prolonged periods of heat and dry conditions impacting key farming regions. The assessment estimates agricultural output could decrease by between 3% and 7%. Additionally, disruptions in energy production, transport networks, and logistics further amplify the overall economic costs, as elevated temperatures and water shortages interfere with normal operations.
During the summer, Western Europe experienced record-breaking temperatures. The Copernicus program indicated that June and July combined set a new record for the region, with an average temperature of 21.62°C—this was 2.79°C higher than the average from 1991-2020. July’s dry conditions were also widespread across much of western and central Europe, with parts of France, Germany, Austria, Hungary, and the Iberian Peninsula recording their lowest soil moisture levels since at least 1979.
France is expected to face the most significant GDP reduction
The largest impact on national economies in the bank’s forecast is projected for France, where heat and drought could cut the country’s GDP growth by approximately 1.4 percentage points in 2026. This translates to an overall decrease of about 0.6% in annual output. Italy and Spain are also among the more vulnerable major economies, while Belgium might experience a noticeable effect. The Netherlands is expected to see roughly a 0.8 percentage point decline in growth, bringing its economic activity close to stagnation for the year.
This heat-related forecast coincides with Europe’s ongoing economic slowdown. In 2025, EU growth reached 1.5%, but a slowdown is now projected for 2026. The European Commission predicted a 0.9% expansion for the eurozone this year. Severe weather events contribute additional pressure by reducing working hours, diminishing farm yields, and disrupting infrastructure. These impacts ripple across sectors, especially when low river levels hamper transportation or high temperatures hinder electricity generation and industrial productivity.
Extreme weather conditions intensify challenges in food supply and industrial output
Economic studies have also linked extreme heat with rising food prices and declining corporate performance. The European Central Bank observed that the 2025 summer heatwave contributed between 0.4 and 0.7 percentage points to euro area unprocessed food prices after a year. Separate research at the firm level in Italy indicated that extreme heat reduced company sales by about 0.8%. Days with temperatures exceeding 40°C also led to significant losses in productivity and manufacturing output, according to that analysis.
The 2026 report emphasizes the immediate economic consequences of this summer’s heat and drought rather than broader climate change projections. Its estimated 1% decrease in EU GDP closely aligns with the 1.1% growth forecast for the year. The largest single source of economic loss is labor productivity, with agriculture, energy, and transportation also incurring additional costs. With western Europe experiencing record-breaking heat and widespread soil moisture deficits, these figures underscore how severe weather events are becoming a tangible factor influencing Europe’s economic prospects in 2026.