Allianz – Global boiling

The recent heatwave experienced in the United States, Southern Europe, and China is estimated to have cost 0.6 percentage points (pp) of GDP in 2023, according to a preliminary calculation by Allianz Research. The cost varied across countries, ranging from 0.1pp for France to 1.3pp for China. The impact of extreme heat is said to be equivalent to that of strikes, with one day of high temperatures (above 32 degrees) being equivalent to half a day of strike. Adaptation measures are crucial in addressing the challenges posed by climate change. Short-term measures such as warning and prevention methods can be implemented, but long-term structural adaptations must also be considered. This includes efforts to prepare cities for climate change, such as urban greening, and finding ways to make workplaces more adaptable to increased heat, such as by adapting buildings, infrastructure, and working hours. The heatwaves experienced in various regions have attracted significant attention, with record high temperatures making headlines and raising concerns about the economic resilience to extreme weather events. Satellite data and computer simulations have shown that June was the hottest month on record, while the world's oceans reached record high temperatures for two consecutive months. These extreme temperatures have been attributed to changes in the wave patterns of the jet stream, causing prolonged heatwaves. The economic impact of natural disasters, including heatwaves, droughts, and wildfires, is significant. These events not only affect people and wildlife but also have negative economic consequences. Developed countries are better equipped to cope with these events, resulting in smaller net macroeconomic losses. However, low-income countries and smaller economies with less diversification are more severely impacted. Natural disasters can temporarily affect economic growth, with relief measures showing an immediate impact on GDP. The relationship between GDP growth and natural disasters is highly nonlinear, with the most severe disasters having the greatest impact on GDP. The impact of tipping points, which are not yet fully understood and quantified, has not been considered in current damage projections.