NETHERLANDS / RankWire.AI / – According to a report by Triodos Bank, extreme heat and drought across Europe might shave off approximately 1% from the European Union’s economic output in 2026. This estimated decline corresponds to around €180 billion and occurs amid a year already characterized by sluggish growth. The European Commission projected in May that the EU’s gross domestic product would grow by 1.1% in 2026. This baseline leaves little room between the expected expansion and the economic damage resulting from this summer’s extreme weather.
Most of the predicted damage stems from reduced worker productivity during periods of intense heat. The analysis estimates this effect at roughly 0.6% of EU GDP. Agriculture also faces significant challenges due to prolonged heat and dry conditions in key farming regions. The assessment suggests agricultural output could drop between 3% and 7%. Additionally, disruptions in energy production, transport networks, and logistics contribute to the overall economic impact, as high temperatures and low water levels hinder normal activities.
During summer, Western Europe experienced record-breaking temperatures. Copernicus indicated that June and July combined were the hottest such months ever recorded, with an average temperature of 21.62°C. This figure is 2.79°C above the 1991-2020 average. During July, dry conditions also extended across much of western and central Europe. Some regions in France, Germany, Austria, Hungary, and the Iberian Peninsula recorded their lowest soil moisture levels since at least 1979.
France faces the most significant impact on GDP estimates
France is expected to bear the largest national economic impact according to the bank’s analysis. The combination of heat and drought could reduce France’s GDP growth by approximately 1.4 percentage points in 2026. This translates to an estimated annual contraction of about 0.6%. Italy and Spain are also among the more vulnerable major economies, while Belgium is expected to experience a notable effect. The Netherlands might see around 0.8 percentage points of growth lost, resulting in economic activity that remains nearly stagnant for the year.
This heat-related projection occurs as Europe already experiences a slowdown in economic expansion. The EU’s growth reached 1.5% in 2025 before the anticipated deceleration in 2026. The Commission’s spring forecast predicted a 0.9% growth for the euro area this year. Severe weather conditions exert additional pressure through lost working hours, diminished farm yields, and infrastructure disruptions. These impacts can ripple across various sectors when low river levels hinder transportation or high temperatures reduce electricity generation and industrial efficiency.
Intense heat impacts food prices and industrial productivity
Research indicates that extreme heat also correlates with rising food costs and diminished corporate performance. The European Central Bank found that the 2025 summer heatwave contributed between 0.4 and 0.7 percentage points to euro area unprocessed food prices after a year. Separate studies at the firm level in Italy showed that extreme heat decreased company sales by approximately 0.8%. Days with temperatures exceeding 40°C resulted in substantial losses in production and efficiency, according to the analysis.
The 2026 assessment focuses 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 1.1% growth forecast for the year. Labour productivity emerges as the primary source of losses, with agriculture, energy, and transportation also incurring significant costs. As Western Europe faced unprecedented heat and widespread soil moisture shortages, these figures highlight how severe weather has become a tangible factor influencing Europe’s economic outlook for 2026.