The intense heat experienced across Europe in recent months is estimated to have reduced the continent’s economic output by €113 billion this year, according to a study by Allianz.
Germany is expected to suffer the second-largest economic impact, with an estimated €25 billion reduction in output, behind Italy at €28 billion. France ranks third, with an estimated €20 billion decline in gross domestic product.
Across Europe, the losses are expected to amount to almost 0.5% of the continent’s projected economic output for the year.
Lower productivity drives economic losses
The estimate is based on Allianz’s newly developed Climate Risk Tracker, compiled by economists and climate risk specialists at Allianz Trade and the German property insurer.
The analysis takes into account weather and damage data as well as models estimating their economic impact.
The losses attributed to extreme heat include lower productivity, production disruptions, longer breaks and increased absenteeism.
The Allianz analysis also highlights the growing cost of weather-related disasters. In Germany alone, damage from storms, floods and other natural disasters over the past five years amounted to around €50 billion.
Annual losses were roughly twice as high as the average recorded between 2000 and 2019, according to Allianz. Globally, the increase was considerably lower, at 54%.
“Germany is particularly affected by climate-related damage,” said Frank Sommerfeld, head of Allianz’s property insurance business.
Northern Europe warming faster
One major factor behind the increasing impact is the faster rate of warming in northern Europe compared with other parts of the world.
Norway was identified as the country most affected in terms of temperature increases. Its average temperature in 2025 was more than 3.7 degrees Celsius above the average recorded between 1950 and 1970.
Germany and France were also among the countries in the upper half of the ranking, with temperatures more than 2 degrees higher than the historical reference period.
The economic cost of natural disasters, however, depends not only on the severity of the events themselves. Densely populated and highly industrialised countries can suffer greater financial losses because more homes, factories, vehicles and other assets are exposed.
El Niño could weigh on global growth
Allianz is also warning of potential economic risks in 2027 linked to El Niño, the recurring warming of sea surface temperatures in the eastern Pacific Ocean that can alter weather patterns around the world.
The World Meteorological Organization expects above-average temperatures across large parts of South America, southern Africa and Australia, while parts of the Indian subcontinent and southern Central America could receive less rainfall than usual.
If El Niño contributes to another exceptionally warm year in 2027, economic output across the 144 countries covered by the study could be reduced by an estimated €392 billion.
China is expected to face the largest economic impact, according to the Allianz analysis.
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