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A Russian Gas Halt Would Hit European, North Africa Economies

Economies in central and southeastern Europe, the western Balkans, North Africa, and Central Asia could see their post-COVID recovery endangered if Russian gas supply is further disrupted, the European Bank for Reconstruction and Development (EBRD) said in a new report on Tuesday.

The EBRD—which tracks the economies in Central Europe and the Baltic States, Southeastern Europe, Eastern Europe and the Caucasus, Central Asia, the Western Balkans, and the Southern and Eastern Mediterranean—revised down its growth estimates for all those regions in the aftermath of the Russian invasion of Ukraine.

Growth in EBRD-covered countries was revised down to 1.1 percent for 2022, down by 0.6 percentage point compared with forecasts released as recently as late March.

There will be a greater economic slowdown and more inflationary pressure in all those regions as a result of the war on Ukraine, the EBRD said in its latest Regional Economic Prospects report published today.

“All forecasts for this year and next are vulnerable to major downside risks in the event that the scale of the war expands or the flow of exports of gas or other commodities from Russia is more restricted. Should gas supplies be further disrupted, for example, output per capita in the EBRD regions in 2022 could be 2.3 per cent lower than the baseline scenario and 2 per cent lower in 2023,” the bank said.

If gas supply from Russia is disrupted, “The effects would be largest for EU economies with large dependence on gas in their energy mix, such as the Czech Republic, Hungary and the Slovak Republic, where industry may be directly impacted by gas rationing,” the EBRD said.

Russia has already halted natural gas supply to two EU members in

central and southeastern Europe as it insists customers start paying in rubles for its gas. In late April, Gazprom stopped gas deliveries to Poland and Bulgaria, saying supply was cut off “due to absence of payments in rubles.”

By Tsvetana Paraskova for Oilprice.com

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