Europe's heat wave could wipe out 1% of EU GDP, costing W295tr

Photo not related to article content. [Reuters]

A heat wave that has gripped Europe since early summer could shave 1 percent off the EU's GDP this year, according to a new forecast.

Dutch bank Triodos warned in a recent report that the heat wave could cost the EU 180 billion euros (about 294.8 trillion won), wiping out nearly all of the European Commission's projected growth rate of 1.1 percent for this year, according to German weekly Der Spiegel on Monday.

The report, titled "Hot Summer Economics," analyzed the impact across four areas: food and agriculture, energy production, transportation and logistics, and labor productivity. It estimated that reduced labor productivity alone would cut EU member states' GDP by 0.6 percent, while agricultural output would fall by 3 to 7 percent.

"Rising food prices, reduced electricity generation, higher power bills, and disruptions to road, rail and inland waterway transport are compounding the damage," the report said.

Hans Stegeman, chief economist at Triodos, said a 1 percent GDP loss this year would mean stagnation. "It is a real cost, but not a catastrophe," he said. "However, the extreme heat of this summer is just a taste of what is to come if we do not respond quickly and forcefully to climate change."

France faces the steepest hit, with the heat potentially dragging its GDP down by 1.4 percent and tipping the country into an annual contraction of 0.6 percent. Italy, Spain and Belgium are also expected to suffer significant losses. Countries that experienced fewer days of extreme heat, such as Poland, are projected to be less affected.

German insurer Allianz previously estimated that just two weeks of heat waves in June had already cut European GDP by 0.3 percent. Allianz projected that for highly exposed economies such as Spain, France and Italy, climate change could reduce growth rates by 5 to 7 percent by 2030.

Transport disruptions are already materializing. The Rhine River, which handles about 80 percent of Germany's inland waterway freight, has dried up so severely from drought that it is on the verge of being effectively split in two.

Jens Schwanen, president of the German Inland Shipping Association (BDB), said Monday that water levels at the Kaub gauge station were expected to fall to a single digit for the first time this week. "In that case, the Rhine can no longer be navigated along its entire length and would effectively be divided into two sections," he said.

Schwanen told the German daily Rheinische Post that at such water levels, not only freight transport but also day-trip and cruise vessel operations would be impossible.

The states of North Rhine-Westphalia, Lower Saxony, Rhineland-Palatinate and Saarland — Germany's most populous — eased restrictions on truck traffic last weekend, according to Reuters.

Switzerland, a landlocked country that relies on Rhine shipping for about 10 percent of its trade, is also on alert. Swiss broadcaster SRF said that if the Rhine is cut off midway, the cost of transshipping cargo by truck or rail would be substantial, and that oversized goods such as heavy machinery and chemicals cannot in principle be transported by road.

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