This year’s heat waves and related productivity declines and lower agricultural output could erase as much as 1% of the gross domestic product of the European Union, wiping out most of the EU’s economic growth expected for 2026, according to Dutch bank Triodos.
The bank and wealth manager, which focuses on financing environmentally and socially sustainable projects, expects labor productivity losses due to the extreme heat waves to reduce the European Union’s GDP by some 0.6% this year. Agricultural output alone is expected to fall by 3% to 7% due to the many heat waves, the bank said in a report carried by Reuters.
After reaching 1.5% in 2025, EU GDP growth is projected to slow down to 1.1% this year, the European Commission said in its spring forecast nearly three months after the war in Iran crippled oil and gas flows through the Strait of Hormuz. The Commission revised down its GDP growth estimate by 0.3 percentage point due to the new energy shock, expecting inflation to rise to 3.1%, an upward revision of a full percentage point compared to the Autumn 2025 Forecast.
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“Higher food prices, constrained power generation and higher electricity prices, and disruption to roads, rail and inland waterways add to the damage,” analysts at Triodos said in their report this weekend.
France, the EU’s second-largest economy behind Germany, is set to be worst hit by the loss of GDP and labor productivity, according to the bank.
GDP in France could dip by about 1.4% due to several extreme heat waves this summer, meaning that the economy could contract by as much as 0.6%.
This summer, France has been forced to slash nuclear power generation amid low water levels on the rivers used to cool reactors.
The power supply and energy issues have spread to central and eastern Europe, with extreme heat and drought disrupting Europe’s energy system, reducing refinery efficiency, forcing cuts to nuclear and hydropower generation, and driving diesel refining margins toward 20-year highs.
By Michael Kern for Oilprice.com
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