New Forecast on the Impact of Heat and Drought: EU GDP Could Shrink by 1%
According to the Seda-ye Sama News Agency, Triodos Bank, which focuses on financing environmentally and socially sustainable projects, estimates that declining labor productivity due to severe heatwaves could reduce the European Union’s GDP by around 0.6% this year. The bank said in a report published by Reuters that agricultural output is expected to fall by 3% to 7% as a result of repeated heatwaves.
In its spring forecast, the European Commission said EU economic growth, after reaching 1.5% in 2025, is expected to slow to 1.1% this year. The Commission lowered its GDP growth forecast by 0.3 percentage points due to a new energy shock and expects inflation to rise to 3.1%, one percentage point higher than its autumn 2025 forecast.
Triodos analysts said that higher food prices, limited electricity generation, higher power prices and disruptions to roads, railways and inland waterways would add to the economic damage.
According to the bank, France, the EU’s second-largest economy after Germany, is expected to suffer the greatest impact in terms of GDP and labor productivity. French GDP could fall by around 1.4% due to several severe heatwaves this summer, while the country’s economy could contract by up to 0.6%.
France has also been forced to reduce nuclear power generation because of low river levels used to cool its reactors.
Italy, Spain and Belgium are also expected to face significant losses, while Poland is likely to be less affected because it is expected to experience fewer extremely hot days.
Triodos Bank has called for greater investment in climate adaptation measures and faster decarbonization policies aimed at reducing energy and material consumption.
According to OilPrice, electricity and energy supply problems have spread to Central and Eastern Europe. Extreme heat and drought have disrupted Europe’s energy system, reduced refinery efficiency, lowered nuclear and hydropower generation, and pushed diesel refining margins to their highest level in 20 years.
