NETHERLANDS / RankWire.AI / – Extreme heat and drought across Europe could remove about 1% from European Union economic output in 2026, according to an assessment by Triodos Bank. The estimated loss equals roughly €180 billion and comes during an already weak growth year. The European Commission forecast in May that EU gross domestic product would expand 1.1% in 2026. That baseline leaves little distance between projected growth and the economic damage estimated from this summer’s severe weather.
The largest part of the estimated damage comes from lower worker productivity during periods of intense heat. The analysis puts that effect at about 0.6% of EU GDP. Agriculture also faces significant pressure after prolonged heat and dry conditions across major farming regions. Agricultural output could fall between 3% and 7%, according to the assessment. Energy generation, transport networks and logistics also contribute to the overall economic cost as high temperatures and low water levels disrupt normal activity.
Western Europe has recorded exceptional temperatures during the summer. Copernicus said June and July together were the region’s warmest such period on record, with an average temperature of 21.62°C. That level stood 2.79°C above the 1991-2020 average. Dry conditions also spread across much of western and central Europe during July. Parts of France, Germany, Austria, Hungary and the Iberian Peninsula recorded their lowest July soil moisture levels since at least 1979.
France faces the largest estimated GDP impact
France carries the largest national impact in the bank’s estimate. Heat and drought could reduce French GDP growth by about 1.4 percentage points in 2026. That calculation places annual output near a 0.6% contraction under the assessment. Italy and Spain also rank among the more exposed large economies, while Belgium faces a notable effect. The Netherlands could lose about 0.8 percentage points of growth, leaving economic activity close to flat for the year.
The heat-related estimate comes as Europe already faces slower economic expansion. EU growth reached 1.5% in 2025 before the current slowdown projected for 2026. The euro area was forecast to grow 0.9% this year in the Commission’s spring outlook. Severe weather adds measurable pressure through lost working hours, weaker farm output and interruptions to infrastructure. These effects can spread across sectors when low river levels restrict transport or high temperatures reduce electricity generation and industrial efficiency.
Extreme weather adds pressure to food and production
Economic research has also linked extreme heat with higher food prices and weaker company performance. The European Central Bank found that the 2025 summer heatwave added between 0.4 and 0.7 percentage points to euro area unprocessed food prices after one year. Separate firm-level research in Italy found that extreme heat reduced company sales by about 0.8%. Days with temperatures above 40°C also produced significant losses in production and productivity, according to that analysis.
The 2026 assessment focuses on the immediate economic effects of this summer’s heat and drought rather than longer-term climate projections. Its estimated 1% reduction in EU GDP stands close to the bloc’s 1.1% growth forecast for the year. Labour productivity represents the biggest identified source of losses, while agriculture, energy and transport add further costs. With western Europe recording exceptional heat and widespread soil moisture deficits, the figures show how severe weather has become a material factor in Europe’s 2026 economic performance.