Europe’s heat crisis threatens EU economic growth in 2026: Which countries are worst hit?

Climate change like the sword of Damocles is hanging low on Europe. Besides human lives, the EU economic growth is at high risk.

According to Dutch bank Triodos’ report, the extreme heat crisis and drought conditions affecting the large swathes of Europe this summer could wipe out as much of the economic growth.

As per the bank’s estimation, the heat-related crises could obliterate around 1 percent of the European Union’s GDP, translating into roughly €180 billion ($208 billion) in economic losses.

At the heart of such hefty losses lies the dwindling labour productivity as the labour losses alone could derail EU GDP by 0.6 percent. The drought-like conditions are likely to damage agriculture output by 3 percent to 7 percent.

Besides reduction in agricultural yield, other factors are also responsible for adding fuel to the fire. It includes constrained power generation, inflationary pressures, high food and electricity prices and disruption to the rail, road and inland waterways.

Worst hit countries

According to Triodos, among all the EU countries, France will be the hardest hit with frequent heatwaves slashing GDP by around 1.4 percent and “and ​potentially tipping ​it into ⁠an annual contraction of 0.6%.”

Spain, Belgium and Italy are also expected to face such losses at substantial scale. But Poland with less recurring hot days is expected to be spared from such losses.

The European Commission projects EU GDP growth at 1.1 percent, whereas the IMF anticipates euro area growth of roughly 0.9 percent. 

Western Europe recorded its hottest June-to-July period in history, driven by climate change-induced heatwaves, droughts and widespread wildfires, according to a Monday report from the European Union's climate monitoring agency.

In the wake of the heat crisis, the levels of soil moistures also reduced significantly than in July 2022 when the last drought gripped the western parts of Europe.

"This is a clear example of how climate change is intensifying heat extremes, with heat and drought increasingly reinforcing one another," said Samantha Burgess from the European Centre for Medium-Range Weather Forecasts, which operates Copernicus.

As the globe's fastest-warming continent, Europe has endured relentless heatwaves, extreme temperatures, and severe dryness throughout the first two months of the summer season.