Eurozone: Heatwaves add macro risk for growth – ING

ING’s Global Head of Macro Carsten Brzeski warns that recurring European heatwaves are becoming a structural drag on Eurozone growth. He cites academic and ECB research showing measurable losses in output and higher food inflation linked to extreme temperatures. Brzeski argues that climate-related disruptions, from productivity losses to supply chain issues, now represent a new downside risk for Eurozone economic performance.

Heat turning into macro headwind

"For years, heatwaves were treated the way insurers treat hailstorms: a regrettable but temporary cost, smoothed out over the cycle. That framing is becoming outdated. A 2021 study of Europe’s worst heat years (2003, 2010, 2015 and 2018) put continent-wide GDP losses from reduced labour productivity alone at 0.3-0.5% (output, not GDP growth), exceeding 1% in the most exposed regions."

"Other studies add the costs of cooling and consequently calculate an even larger impact on growth. Add rising healthcare costs, emergency infrastructure repairs and the impact of heatwaves and drought on waterways, transportation or agriculture, and the negative impact on the economy grows further still."

"Last year, a joint paper from the University of Mannheim and the ECB also put a number on the economic damage, analysing the heatwaves, droughts and floods of the summer of 2025. According to the paper, the European economy lost some 0.3% of output. This damage could grow to an accumulated 0.8% by 2029, taking into account the effects of lost productivity, supply chain disruption and depressed tourism revenue."

"Previously, the ECB had also estimated that heatwaves and drought could push up food inflation by some 0.4-0.9pp, with that effect potentially doubling over the next 30 years."

"Looking ahead, while the recent drop in energy prices should bring some relief to European households and companies, the current heatwaves bring a new downside risk for the European economy: potential supply chain frictions due to low water levels in main rivers and affected infrastructure like railways and highways, but also productivity losses."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)