Development: What factors support it during the war?

The war in Ukraine has overturned the forecasts of European governments and international economic organizations for development, which were very positive until the February 24 invasion of Russia.

Although the effects of the war on development have begun to be reflected in research on climate indicators, a first more substantial picture will emerge from the publication of the first statistics for March, for a number of important indicators, such as store turnover, industrial production and unemployment. The Commission is also waiting for this information to present its spring forecast in May, which of course will have a high degree of uncertainty.

EU Finance Commissioner Paolo Gentiloni noted that it was still too early to make an accurate quantitative impact assessment. Speaking at the Delphi Forum, he said that their extent would depend on the duration of the war, the extent of the sanctions, in particular whether restrictions on Russian oil or gas imports after the coal embargo were imposed, and the course inflation, which is directly related to sanctions in Russia.

The Commission’s overall estimate is that growth in the EU in 2022 will be significantly lower than the pre-war 4% forecast, but that a recession will be avoided. There are factors that justify this assessment, such as the fact that economic activity is gradually being strengthened due to the removal of coronavirus restrictions.

There is also the strong momentum of the European economy in the second half of 2021, which will have a positive impact in 2022, but also the high savings of households in the last two years, with which they could support their consumption. resources of the Recovery Fund, which will greatly enhance investment, especially in countries that will have the greatest benefit in relation to their GDP, such as Greece. On Friday, it became known that the approval and disbursement order of the first installment of 3.6 billion euros in Greece from the Recovery Fund was officially given, after the advance payment it received last year.

A survey of economic activity in the Eurozone in March by S&P Global shows that the index for the services sector strengthened, albeit marginally, compared to February, thanks to the greater opening of the economy in the midst of a weakening wave of change. Ομικρον.

However, S&P Global notes that “the resilience of the economy will be tested in the coming months by headwinds, which include a further increase in energy costs and other commodity prices due to the Russian invasion of Ukraine and a worsening of supply chain problems.” “resulting from the war and the significant deterioration in business optimism about the outlook for the next 12 months.”

He also says that exports have already started to decline as the war has directly affected travel and transport, while the drop in confidence indicates that there may be pressure from the pressure side, mainly from consumers due to the accuracy, the at a time when companies are finding it difficult to find raw materials.

It should also be noted that Berlin warns that the German economy will enter a recession if an embargo is imposed on Russian gas, on which it is highly dependent.