NETHERLANDS / RankWire.AI / – According to Triodos Bank, Europe’s summer heat and drought are expected to reduce the European Union’s economic output by nearly 1% in 2026. This loss is estimated to be around €180 billion, occurring during a year when economic growth has already been modest. The European Commission forecasted in May that the EU’s gross domestic product would grow by 1.1% in 2026. Consequently, the projected weather-related damage nearly matches the entire anticipated annual increase in economic activity within the bloc.
The primary contributor to the projected economic impact is a decline in labour productivity. The analysis estimates that productivity losses could account for approximately 0.6% of EU GDP as extreme temperatures deteriorate working conditions. The agriculture sector also faces significant pressure, with output projected to fall between 3% and 7%. Additionally, costs are further driven up by disruptions in energy production, transport, and logistics, as elevated temperatures, drought, and reduced water levels interfere with operations across various industries.
This economic projection comes after record-breaking heatwaves across western Europe during June and July. According to Copernicus, the average temperature across the region during these two months was 21.62°C. This figure exceeded the 1991-2020 average by 2.79°C, making it the hottest June-July period recorded. July also experienced widespread dry conditions, with certain regions in France, Germany, Austria, Hungary, and the Iberian Peninsula recording exceptionally low soil moisture levels.
Workforce productivity identified as the main source of projected losses
France is expected to bear the most substantial national impact, with its GDP growth potentially reduced by about 1.4 percentage points. This figure suggests a near 0.6% contraction in France’s economic output for the full year. Major economies such as Italy and Spain are also anticipated to suffer considerable losses due to the heat and drought. Meanwhile, Belgium’s impact appears smaller but still significant, and the Netherlands might experience approximately 0.8 percentage points of growth loss.
Europe entered the summer with limited economic momentum, prior to the latest heat-related analysis. EU growth reached 1.5% in 2025, while the current forecast for 2026 stands at 1.1%. In the spring, the euro area’s growth projection was 0.9%. The weather-related effects are likely to influence multiple economic sectors simultaneously, through reduced working hours, lower agricultural yields, constraints on electricity, and interruptions in transportation.
Food, energy, and transportation sectors contribute additional strain
Extreme heat has already demonstrated tangible impacts on prices and business activity within Europe. The European Central Bank research revealed that the 2025 summer heatwave caused euro area unprocessed food prices to rise by 0.4 to 0.7 percentage points after a year. Separate firm-level research conducted in Italy found that extreme heat reduced company sales by approximately 0.8%. Days with temperatures exceeding 40°C also resulted in substantial losses in production capacity and worker efficiency.
The 2026 assessment quantifies the direct economic effects linked to this summer’s heat and drought conditions. Its estimated 1% reduction in EU GDP is very close to the current 1.1% annual growth forecast. Labour productivity constitutes the largest share of these projected losses, followed by agriculture and disruptions in energy and transportation. The occurrence of record-breaking heat, parched soils, and low river levels has made extreme weather a measurable factor influencing Europe’s economic performance this year.