Heat Waves Becoming Serious Economic Risk in Europe
Summer heat waves reduce labor capacity and economic activity, especially in construction, agriculture, and services, with long-lasting effects, research shows.
Research indicates that high temperatures during summer months negatively affect the economy by limiting work capacity and reducing activity in several sectors. Construction, agriculture, and services are the most affected.
Regional economic activity typically declines by about 1% during heat waves. The impact is not temporary – production levels remain lower for several years afterward. After a drought, regional output can be 3% lower four years later, and after floods, 2.8% lower.
Kārlis Purgailis, chief economist at Citadele Bank, notes: "Heat waves are no longer just a seasonal challenge – they are becoming a significant economic risk factor. We see that they affect both growth and prices simultaneously, creating additional uncertainty for businesses."
According to European Central Bank (ECB) estimates, annual agricultural growth could decrease by 1.9 to 7.6 percentage points in most regions. Industry, especially manufacturing in Eastern Europe and the Baltic states, is less affected.
Extreme weather directly translates into rising food prices. In recent years, prices have increased for products such as olive oil, cocoa, and coffee. Studies suggest that food inflation will remain sensitive to climate fluctuations in the future.
ECB climate projections indicate that a heat wave similar to the 2022 event could increase food price inflation by up to 1.8 percentage points by 2060. This means that in the future, the impact of heat waves on the economy and prices will be significantly greater than before.
